In this briefing:
1. DTAC: Survived 2019 but Pressured on All Sides. Maintain Reduce.
Total Access Communication (DTAC TB) has emerged from a torrid 2018 and has survived. That was not always a certainty as the year progressed and their access to much of their spectrum expired. In the end DTAC managed to buy some 2x5MHZ of 900MHZ and 2x5MHZ of 1800MHZ spectrum and retain access temporarily to expired spectrum (the remedy). See DTAC 3Q Result: No Recovery Yet. Spectrum Issue Now Solved, but Leverage Is Rising.
However, survival has come at a cost. DTAC is paying a high price to TOT to rent its 2300MHZ spectrum (and is paying to build out the network), it has paid large sums to secure small amounts of 1800MHZ and 900MHZ spectrum to partially replaced expired concession spectrum and has agreed to pay to use equipment sitting on CAT’s infrastructure. Finally it has moved to settle a number of disputes with CAT (discussed in Thai Telcos: Outstanding Liabilities to CAT/TOT Loom Post DTAC’s Partial Settlement) and pay them a net THB9bn. That clears the decks partially but there are some very large outstanding cases not covered (these relate to all three operators).
Latest results do little to suggest that good times are just around the corner. They were disappointing and suggest the Thai market will continue to struggle in 2019 as discussed in Emerging Asean Telcos 2019: Indonesia Looks Best Placed. Malaysia Improving. DTAC’s survival has led to increased competition in the market as it moves to win back customers and that suggests more earnings disappointment to come. We remain cautious and somewhat surprised by the strong move in recent days. We have a Reduce recommendation and THB32 target price.
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