Brief Thailand: Thai Telcos Struggle as All Three Seek to Gain Share While Spectrum Risk Looms Again in 2019. and more

In this briefing:

1. Thai Telcos Struggle as All Three Seek to Gain Share While Spectrum Risk Looms Again in 2019.
2. Snippets #19: Marijuana, Mergers, and More
3. China – Eurozone Negative Feedback Loop.

1. Thai Telcos Struggle as All Three Seek to Gain Share While Spectrum Risk Looms Again in 2019.

Chris Hoare met the Thai telcos recently but did not come away particularly enthused. His view is that the market probably remains tough this year. The good news is that the low priced, limited speed with unlimited usage, offers have mostly been withdrawn. It will take 2-3 quarters for this to work through, as these were 12 month plans, but it does suggest improved data monetization as the year progresses. A lack of data monetization was the key reason behind the revenue slowdown in 2H18. However, with data usage now so high (around 10GB/month), and content services unlikely to lead to revenue growth in the foreseeable future, overall revenue recovery is likely to be modest. 

2. Snippets #19: Marijuana, Mergers, and More

Five interesting trends/developments that could impact Thai equities in the recent period:

• Legalization of medicinal marijuana. Thailand legalized medicinal use of marijuana at end of February and has already received immense interest from potential growers. At some point, pharma and healthcare companies could be beneficiaries of this trend.
• Rumbles in the airline industry. Asia Aviation (AAV TB) , parent company of Thai Air Asia, acquires a stake in competitor Nok Air. This is one of the few signs of industry consolidation in this sector.
• MOU signed between TMB and Thanachart. The deal may take longer than initially expected, but the two sides have agreed on some basics such as 70% equity financing and deal size of roughly Bt130-140bn.
• Read-through from US Election 2020. Some of the Democrat policies advocated by candidates in 2020 could turn out to be positive for Asian equities.
• BGrimm acquires Glow SPP1 for a bargain price of Bt3.3bn, or 55% of the expected price, opening the way for the GPSC-Glow merger, potentially the largest deal of 2019.

3. China – Eurozone Negative Feedback Loop.

Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit,  this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.