Telecoms set for upgrade under new regulatory commission

Earlier this week, the Senate successfully completed its selection of 11 commissioners for the powerful body, which is empowered to regulate the broadcasting and telecom sectors.

One of its top priorities is to address the bottleneck in 3G licensing. Citibank research says the choice of 11 NBTC commissioners is positive, given that one notable elected person is Dr Natee Sukonrat, a former member of the National Telecom Commission, which will be shortly replaced by the new body.

According to law, Prime Minister Yingluck Shinawatra is required to submit the names of the 11 NBTC commissioners chosen by the Senate for royal endorsement shortly.

According to the research, Dr Natee is a strong proponent of the 3G licensing and has a lot of experience in telecom regulation, so he is expected to help speed up the licensing process after the Supreme Administrative Court last year halted the auction of 3G licenses due to the absence of the consolidated regulatory body.

According to the Constitution, the NBTC, not the NTC, has the mandate to issue those licences.

Once up and running, the NBTC is expected to proceed with the establishment of a frequency master plan, which in turn would allow for eventual 3G licensing. The licensing is expected to be implemented in the second half of 2012.

Thailand currently has three key players in the telecom industry, with AIS and Dtac seen as more attractive than True Corp, especially in view of the fact that the NBTC is set to reform the industry via 3G licensing and radio frequency re-issuance, with the expiry of existing concessions.

Valuation of these stocks will now include the potential for long-awaited 3G services in Thailand. Regarding Advanced Info, or AIS, the target price is Bt140 per share.

The downside risks for AIS include a negative ruling on pending cases against the firm; AIS disqualification from 3G licensing, and deterioration in the macro-economic and political climate could lead to a significant slowdown in telecom services.

For DTAC, the target price is Bt75 per share, while the downside risks include a big access charge penalty if imposed by state-owned TOT.

Regarding True Corp, the target price is Bt2.7, with major upside factors including a court resolution that its subsidiary True Move is no longer liable for access charge back payments, and a quick migration by True Move of 2G revenue streams to 3G, whose fees will be lower.

For broardcasters, the top gainers are BEC and MCOT, as TV is the dominant mass medium. At present, the top three broadcasters, including BEC, control about half of the country's total advertising spending.

With the NBTC in place, there will be further convergence of content through a broader network, with a positive near- to medium-term impact on broadcasters.

For BEC, the target price is Bt52, while the less attractive MCOT's target price is Bt33.

BEC is generally seen as better positioned to take advantage of the near-term trend, while it's also strong in media convergence.

Regarding MCOT, the risks are regulatory changes in the near term, and its growth could be affected by heavier but lower return on investments, according to an international bank's research.