Maturing Thai mobile market raises risks for telcos

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Thai telcos are likely to compete aggressively including offering unlimited data packages, putting further pressure on their revenue and delaying earnings recovery.
MAY 15, 2019 - 6:32 PM

Thai telecom operators are likely to continue to face pressure on mobile-service revenues, beset by slowing growth in data revenue. 

The country's third-largest operator, Total Access Communication Public Company in particular, will be the most affected due to its large exposure to mobile revenues said Fitch Ratings in a note on Monday. 

Advanced Info Service Public Company, which is the largest operator on the other hand, is likely to see its diversification into fixed broadband service reduce the risk of slower growth in the mobile segment. 

Fitch noted that operators may need to cut tariffs further or deepen handset subsidies to accelerate the data service adoption in the lower-tier segment. 

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Growth in data subscriptions had started to decelerate in the past few quarters on higher 4G device penetration. In addition, the growth in data usage for existing subscribers has not translated fully into higher revenue, given the fierce competition in data tariff offerings. 

Fitch said it expects DTAC's market position to strengthen in 2019 after acquiring 1.8GHz and 900MHz spectrums.

"This should help plug the gap in its spectrum portfolio and network quality that has constrained its competitiveness over the past few years.

"Nevertheless, meaningful network improvements and brand rebuilding may take effect only after a few more quarters, suggesting EBITDA recovery will probably take place only in 2020," said Fitch. 

AIS meanwhile should continue to benefit from its diversification strategy. 

AIS's free cash flow is likely to turn positive in 2019 due to lower spectrum payments and falling capex following the completion of the massive build-out of its 3G/4G networks.

This should result give AIS more rating headroom and financial flexibility to support an increase in marketing expense said the ratings agency.