Information & Communication

Information & Communication  (ICT)

 

- 4G bid to start within 2015  

3G network service has become less efficient due to increasing usage, so some mobile operators (TRUE and DTAC) that still had available bandwidth could use it to efficiently provide 4G service. Since TRUE has more available bandwidth and wifi network service, TRUE is more successful than peers in terms of service. ADVANC has the smallest bandwidth and no 4G network service, so it has to invest in 3G network development. However, the NBTC’s bid of 1800 MHz bandwidth (standard bandwidth for 4G network) license in late 2015 would possibly eradicate ADVANC's weakness. 

- 4G maintains competitiveness rather than gives short-term added value  

There are two 4G licenses available on bid, but there are three potential mobile operators, which means the competition would be fierce. In terms of financial position and necessity of 4G network, ADVANC has the highest chance of winning one of the two licenses, while TRUE and DTAC would have to compete for the rest. No matter which mobile operators win the bid, all three of them would have more sufficient and balanced resources to provide 4G network by the time of the bid. As cost increases, three of them would find a way to boost their revenue and compensate for higher cost, similar to other countries. However, since their mobile subscriber base has already reached the point of saturation and their behaviors are not flexible enough for service rate hike, mobile operators would not be able to immediately put 4G cost burden on subscribers (boosting ARPU), but the service rate raise must be gradual. 4G network investment might take seven to ten years to make a breakeven, so a new technology may have been invented by that time. The new 4G bandwidth from the bid would maintain the mobile operators' competitiveness rather than give them added value in the short term. Therefore, we conservatively maintain our forecast, expecting no upside from the 4G bid. 

- ADVANC: Top pick  

Although certainty about 4G bid has positive sentiment on the sector, every mobile operators would have to bear higher expense after the bid, thus depressing their earnings; we reiterate NEUTRAL. Top pick is ADVANC(FV@B285). Unlike peers, its earnings would grow as 2G regulatory cost would decrease and 4G network would help eradicate its weakness. We also like INTUCH(FV@B113), the parent company that holds 40.45% stake in ADVANC.