Fourth-quarter earnings are expected to drop 10 per cent quarter on quarter and 31 per cent year on year to Bt3.27 billion, which would be the lowest quarterly earnings for four years.

Based on the expected quarterly earnings weakness, the brokerage has downgraded its 2006 earnings forecast by 3.3 per cent to Bt16.3 billion or Bt5.54 per share, 13.6 per cent below the previous year.

However, it has maintained its 2006 dividend forecast at Bt6.30 per share, implying an 8.7-per-cent dividend yield at the current share price. This assumes another dividend of Bt3.30 per share from second-half performance.

The brokerage has also lowered its 2007 earnings forecast by 5 per cent to Bt17.2 million by revising downward the blended ARPU assumption by 7 per cent to Bt317 per subscriber per month. This is in expectation of a continuing price war and no benefits as yet from a new interconnection regime.

AIS is likely to have the most advantage from the interconnection-charge regime due to its larger subscriber base, but the brokerage at this time has not factored the potential gain from the regime in its estimations until it sees a clearer schedule.

The broker predicts there may be a trial period of six to 12 months and real payments may then begin in the second half of the year at the earliest.