Total Access Communication

Total Access Communication Plc (DTAC)
What’s new? DTAC reported to the SET that on June 6 an arbitration panel dismissed CAT's claim against it for Bt23.16bn. CAT claimed that the firm owed it that amount because the a Sept 2002-Sept 2006 telecoms excise tax should have been paid in addition to revenue-sharing obligations to CAT.
Background: During the Thai Rak Thai administration, mobile operators paid concession fees to concession owners, TOT/CAT, which were divided into: 1) a 10% telecom excise tax, which TOT/CAT paid on behalf of private operators, submitted to Ministry of Finance and 2) the remainder which was kept at TOT/CAT. Under Surayuth Chulanont government (Oct 2006-Jan 2008), the telecom excise tax rate was set at 0% and technically concessionaires were required to submit the telecom excise tax directly to the Ministry of Finance (or would have been if the excise tax had been raised above zero).
Psychologically positive for DTAC: The arbitration panel’s decision was as expected. Note that on May 30, 2011, an arbitration panel favored ADVANC over its concession owner, TOT, in the same dispute. The news should boost sentiment toward DTAC, but doesn’t have any financial impact. In any case, the issue may not have ended yet—CAT will probably file a case with the Central Administrative Court. The losing party in that case would be free to appeal. Litigation might continue for years. Note that DPC and TRUE Move are also in arbitration with CAT over the same issue. 
Action: DTAC remains the 3G laggard play and is one of our picks. We think the stock was oversold following weak 1Q12 earnings and concerns about network quality issues. We expect such concerns to subside in 2H12 and DTAC’s share price to start reflecting greater 3G visibility over the next four months. Our BUY rating stands, premised on the greatest scope for upside from 3G and a generous dividend yield of 7%.