Telecom

Telecom 

 

4G handsets are coming down in price – particularly with the sets from China arriving on the market – and this is making 4G more affordable and thus more popular. However, 4G spectrum availability is limited and lopsided, with TRUE leading the pack and ADVANC left out in the cold. We expect the auction to level the playing field, giving more spectrum for everyone. We do not expect a price fight and do expect higher ARPU from 4G. TRUE remains our top pick as it heads into the black and challenges ADVANC’s long-held status as top dog in the cellular market.  

 

4G becoming more and more popular. Subscribers are flocking to 4G as the availability of 4G handsets rises and prices fall. New players from China are marching into the Thai mobile market this year, including Huawai, Oppo, Acer, and Asus. They bring with them not only a wide range of styles - including ones able to handle 4G - but also low prices – some as low as Bt4,000. This is far cheaper than Apple’s 4G handset introduced last year that was priced at Bt21,000. With the price of 4G handsets coming down, we expect more users to switch.  

 

Not every operator can offer 4G. The growing popularity of 4G is leaving ADVANC out in the cold as the only operator unable to offer 4G. This is sending users in droves to TRUE and DTAC. ADVANC cannot offer 4G as it does not have sufficient spectrum to start it, meaning it is the hungriest for the auction of new spectrum. According to the timeframe set out by the National Broadcasting and Telecom Commission (NBTC), the auction of 1800MHz will be held in November and December will bring the auction of 900MHz. If this goes as planned, ADVANC will then be able to start competing with the other two on a more level playing field.    

 

Whole industry to benefit from 4G. The industry as a whole will benefit from the several auctions that will be held soon. The latest news that CAT and DTAC have agreed to return 5MHz on 1800MHz, now under concession, to the NBTC for auction brightens the picture even more because it increases the bandwidth being put up for auction on 1800MHz to 30MHz. This amount can be split equally into three licenses rather than two and is reminiscent of the 2.1GHz auction in 2013 when the licenses exactly matched operators. As a consequence, there was almost no competition in the bidding and the final prices for the licenses were equal to the starting prices. This 1800MHz auction should be no different and will benefit all three since they will be able to pay what the licenses are worth rather than bidding each other up. 4G is also ARPU accretive as upload/download speed is 100 times faster than 3G. This gives operators a solid reason to charge more for 4G services.     

 

TRUE is our top pick. We maintain Buy on TRUE with DCF-based target price of Bt17. A successful capital increase and the rise to #2 in the postpaid market shoved the share price up and we expect another move up as it challenges ADVANC for top spot. Backing its thrust is its first-mover advantage in 4G, made even keener by the delay in the 1,800MHz auction plus DTAC’s struggle to protect its market share. We expect TRUE’s gain in revenue share will continue for at least the next three years.