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Advanced Info Service
Phatra Securities maintains its "sell" recommendation for Advanced Info Service stock.
As the interconnection-charge (IC) regime will be up and running in a few months, Phatra says its IC earnings scenario will form a base-case scenario for Advanced Info Service (AIS). With the IC regime, AIS's 2007 earnings are projected to grow 13.6 per cent year on year; without the IC, flat growth is expected. Discounted cash flow in the IC scenario is Bt90.5 per share. But with high regulatory risk, Phatra maintains its "sell" rating on the stock. AIS disclosed in an analysts' meeting that it would "defend its market share at all costs". In order to achieve a 50-per-cent subscriber market share (from 48 per cent in the third quarter last year), the firm will spend more to improve its network quality, brand image, distribution and price. It believes that higher market share will eventually lead to higher revenue and margin. AIS aims to change consumers' perception that its service is more expensive than competitors. Extending buffet-style promotion from the end of January to June is part of the plan. AIS says it now has sufficient network capacity and will not have the same sort of constraints as last year. However, in the short term, the pressure on monthly average revenue per user and margin will remain. AIS, Total Access Communication (DTAC) and True Move have signed interconnection agreements, and the IC payments among them are supposed to start on February 1. But as the three still cannot reconcile the traffic counts, there could be a delay of one or two months. AIS maintains its Bt3-billion IC revenue guidance for 2007.
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