Information & Communication Technology

Information & Communication Technology (ICT)

 

- Surrounded by pressuring factors   

Mobile stocks fell sharply yesterday as a result of the following negative factors. 1) There was concern that an auction of a 1800 MHz 4G license might be delayed further from the current schedule in August 2015; the license auction had been suspended once by the NCPO’s order in July last year. According to the NBTC, it has not yet received a response from the NCPO regarding its request for permission to resume the process to the auction submitted since the beginning of the year. 2) It is reaching a one-month due that the cabinet has to consider the Excise Department’s proposal for reinstatement of a telecom excise tax of 10%. 

- Auction delay possible, but not too long    

The share price falls probably have resulted mainly from a 4G action issue. ADVANC (the only mobile operator without a 4G service) dropped most among peers for it is facing a problem of insufficient service capacity and most needs the spectrum for providing a 4G service. However, we believe the delay will not be longer than one year because the government also needs to develop telecommunication infrastructures in response to a core policy of digital economy (which is to add economic value by encouraging online transactions), in which 4G plays an important part. At the same time, ADVANC already has a plan for such a situation; it will launch a super wifi service, which is 10 time faster than 4G, and improve its 3G network in all major areas, which would help the company continues its operation for the next couple years without a 4G service. Moreover, ADVANC can rent TOT’s spectrum for providing a 4G service in a form of wholesale and resell business, like the case of CAT’s 850 MHz spectrum rented by TRUE. About telecom excise tax collection, it is very unlikely since the tax was earlier revoked from a reason that a mobile service is not deemed as a luxury service. 

- Adversely affect sentiment. Maintain NEUTRAL   

The aforementioned factors have adverse effects sentimentally; we maintain NEUTRAL for the sector. Nevertheless, this is an opportunity to accumulate stocks with good fundamental factors that have fallen significantly, especially ADVANC(FV@B285) and INTUCH(FV@B113), because ADVANC already has a plan in case the auction is really delayed. About the telecom excise tax collection, in the worst case scenario that a mobile company has to pay the tax at a rate of 5% (the other 5% will be collected from subscribers or 10% in total), ADVANC and INTUCH’s fair value will be B259 and B103, respectively, which still provide an upside from the current share prices.