Information & Communication Technology
ADVANC, INTUCH's prices already dropped on bad news. Good entry point Neutral
Information & Communication Technology
The NCPO decided to postpone an auction for 1800/900 MHz spectrum
bandwidth for 4G network by a year. ADVANC would be affected most, as it
is the only mobile phone operator that has not provided 4G service.
However, ADVANC and INTUCH's share prices have considerably dropped on
the bad news; this is a good entry point.
- 1800 MHz, 900 MHz network spectrum auction postponed by a year
According to the No.94 Announcement of the National Council for Peace and Order
(NCPO), 1) An auction for 1800 MHz and 900 MHz spectrum bandwidth for 4G
network is postponed by a year from 2014 or early-2015 (TRUE and ADVANC's 2G
network spectrums expire on September 15, 2014 and September 15, 2015,
respectively). The NCPO has ordered the NBTC to temporarily facilitate 2G service
provision for 3 million subscribers of TRUE's 1800 MHz spectrum. 2) The NBTC is
required to amend its regulations to ensure transparency.
- ADVANC to be affected most
According to the NCPO's announcement, the auction for 1800 MHz and 900 MHz
spectrum bandwidth is expected to be held in July 2015. Though the bidding of two
licenses are not included in our forecast, ADVANC would get the largest impact from
the delay in doing business before the auction because ADVANC needs 1800 MHz
spectrum to start providing 4G service so that it can compete with DTAC and TRUE,
who have been providing 4G service on 2100 MHz spectrum since 2Q14. ADVANC
would be at disadvantage among peers and may lose some of its subscriber base,
such as IT lovers. Yet, its current earnings would not be significantly affected.
ADVANC still has time to migrate 2G subscribers to 3G service before 900 MHz
spectrum license expires on September 15, 2015. Meanwhile, TRUE would get a
smaller impact from the delay. The auction would be held after 1800 MHz spectrum
expires on September 15, 2014. Currently, there are 3 million subscribers of TRUE's
2G 1800 MHz spectrum that have not been migrated to 3G service. TRUE should be
able to maintain its customer base since the NCPO has ordered the NBTC to facilitate
continuous 2G service provision. Meanwhile, DTAC is expected to get no effect from
the delay since its 2G service on 2100 MHz spectrum expires in the next four years.
- ADVANC, INTUCH's prices already dropped on bad news. Good entry point
We expect that the share prices of ICT stocks would temporarily drop because of
short-term negative sentiment; it has been clear that the auction would be definitely
held (it was previously uncertain). We assign NEUTRAL for the sector and select
ADVANC(FV@B270) and INTUCH(FV@B109) as top picks. Their share prices have
considerably absorbed the bad news; their expected P/E ratio have dropped to make
the lowest in ICT sector at 16x and 14.2x, and they provide the highest dividend
yields of 6.2% and 7.0%, respectively. We also recommend BUY for
DTAC(FV@B122); it is the only one Telco stock not affected by the delayed auction.
Though it possesses high expected P/E ratio of 19.5x, its share price has dropped
along with the sector, granting 18% upside including dividend yield.
