Total Access Communication

Total Access Communication Plc (DTAC)

 

Though not burdened with the high cost of a license, DTAC will still need to spend – and spend heavily – to stay competitive: both to build up its service on the spectrum it still has and on marketing. We thus expect a 14% YoY fall in earnings in 2016. At the same time, however, the plunge in share price has brought dividend yield up to an attractive 8%. We stay Neutral.   

 

Not much new in the conference call. DTAC held a special conference call with analysts and fund managers last night. The tone was businesslike. Key takeaways: 

 

i) DTAC assured investors that the lack of a license giving it more spectra will not impact its operations. It has plans in hand to stay competitive. DTAC has 50MHz on three spectra: 10MHz on 850MHz, 25MHz on 1800MHz, and 15MHz on 2100MHz (2.1GHz). This puts it in second place, behind TRUE’s 55MHz, but ahead of ADVANC’s 30MHz. It saw no need to rush in to bid for licenses at such a high price this round since it is sure the spectra it is now using will come up for auction once its concession expires in 2018.          

 

ii) DTAC’s primary concentration in 2016 will be on 4G – expanding coverage to blanket the nation and boosting capacity, particularly in urban areas. It will invest in 2.1GHz for nationwide coverage and use 1800MHz for building capacity. The logic behind this division is simple: expansion requires a substantial outlay and this is best done on 2.1GHz, for which it has a license, while 1800MHz is still under concession (so assets go back to CAT); plus, boosting capacity costs less.  iii) DTAC is also determined to switch service revenue back to growth from the contraction seen since 1Q14 and at the same time hold tightly on to its current revenue market share. 

 

iv) It is still waiting for government and cabinet approval of the joint-venture deal with CAT on the towers. The firm believes the deal will be concluded and contract signed in 1Q16.  

 

v) DTAC is standing firm on its 80% dividend payout.     

 

Neutral, at target price of Bt41. We feel comfortable with our 2016 earnings forecast, which posits a 14% decline even without the cost of the license, dragged down by a rise in network-related costs (depreciation and network opex). In addition, DTAC is very likely to spend heavily on marketing to keep its market share. We continue to stay Neutral with DCF-based TP of Bt41, as the sharp fall in share prices has lifted dividend yield to an attractive 8%.