ICT sector

Telecom committee gives green light to 3G license granting by this week

ICT sector

Telecom committee votes 4:1 to grant new 3G license to bid winners by this week Settapong Malisuwan, chairman of the telecom committee of the National Broadcasting and elecommunication Commission (NBTC) revealed that the Board meeting on 7 December 2012 voted 4-1 to grant the spectrum licenses and to license 3 subsidiaries of ADVANC, DTAC, and TRUE that won the bid for slots on the 2.1 GHz spectrum to provide 3G broadband cellular service. The committee also passed a resolution to attach to the licenses a condition requiring them to offer tariffs 15% lower than the average of both voice and data tariff fees of all telecom operators as of

December 7. This condition relates to the 2.1GHz licensing regulations that the license holders must offer fair tariffs and ensure service quality. The new 3G licenses will be granted to private operators within 7 days after 7 December 2012 or by the end of this week. This 15-year license is

effective since 7 December 2012 until 7 December 2027. After this, the NBTC will sign an approval and notify the 3 mobile operators to obtain the

licenses and proceed with the new service.

Licensing granted as scheduled, benefiting mobile operators especially DTAC

From now on, mobile operators will take at least 4 months to conduct the installation of the 3G network before starting the 3G service in Bangkok and other big cities since 2Q13, which will enhance efficiency and capacity of data service because the current concession has limitation in capacity 3G standard. Moreover, under the new concession, operators' cost of service will decrease significantly from a decrease of income sharing from25-30% of total service income to only 10-15% (license cost included). After the 3G service starts, there will be continuous migration of 3G customers from the current license which has high cost to the new license which has lower cost, on an assumption that the operators would be ableto carry migration of high net worth customers (10% of total customers) to the new license in 2013. The operator that will benefit the most from this issue is DTAC. Net profit growth in 2013 is projected at 18% as now

the company is paying income sharing of 30% of its total income. Meanwhile, ADVANC will get less benefit because its current income sharing is lower at 25%, so net profit growth in 2013 is estimated at only 12%yoy.

Upgrade to OVERWEIGHT. INTUCH and DTAC are top picks

The clearness in the 3G-2.1GHz license will accelerate the new 3G service to occur by 2013. Moreover, prices of stocks in the sector still have more than 17% upside from the fair value including 3G. Accordingly, we upgrade our recommendation for the sector from Neutral to Overweight and select INTUCH (FV@B86.0) and DTAC (FV@B110.0) as top picks because they have the highest upside of 30.3% and 25.4% respectively.We also reiterate Buy for ADVANC(FV@B250.0) as the current share price has 17.4% upside left.

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Article source: http://www.thethailandlinks.com/2012/12/11/ict-sector/