Advanced Info Service

Vow to reign 3G business with highest quality services BUY

Advanced Info Service Plc (ADVANC)

Bullish about new 3G service with highest quality since April

ADVANC has announced its vision and the direction of the telecommunication

industry in 2013 yesterday. The company will focus on its 4 strong points: 1)

network quality; 2) a launch of quality 3G-supporting smart phones throughout

the year coming with packages tailored to individual lifestyle for every target

group ranging from low income to high income customers as well as a launch of

3G-supporting mobiles that focus on voice service; 3) joining hands with partners

such as CSL (giving data storage service to ADVANC's customer), BTS, and

Master Card, to develop innovative applications on smart phones that upgrade

life and gives exclusive experiences for customers; 4) service quality. The new

3G license (2.1 GHz) will drive the industry income to grow by 7% this year,

mainly from data services. ADVANC's 3G service under the new license will start

since April with the investment of B13bn for the first phase to provide the service

in key provinces capturing 50% of the total population in the first half of the

year. ADVANC has targeted to expand its servicing area to cover 80% of the

population by the end of this year and aimed to transfer its 3G customers on 900

MHz spectrum of around 4 million numbers under the existing concession to the

new 2.1 GHz spectrum within this year.

New 3G service will boost profit growth to 12%

ADVANC's vision and goal, especially regarding the new 3G license, are still in

line with our assumption and forecast that the service will start since 2Q14

onward. Moreover, the number of customers that will be transferred to the new

3G service is also close to our assumption for premium customers of 3.8 million

numbers. Combined with the company's strategy of differentiating itself from

rivals and giving importance to every class of target group, we are bullish that

ADVANC will be able to maintain its largest market share in the long run.

Furthermore, the company's development of new mobile applications to facilitate

and upgrade daily life of customers as well as a security system for mobile usage

will help maintain customer base and generate additional income for its

associated companies such as CSL which will adopt a cloud computing technology

as an additional service of ADVANC. Consequently, we foresee profit growth in

this year at 12%yoy to B39bn.

High upside at 26%. Reiterate to buy but prefer INTUCH

The share price has declined by 5.3% over the past 2 weeks. We believe this is

an effect from ADVANC's inability to pay 100% of the dividend yield in 2H12 from

adjusting of investment in DCP which made retained profit from separate

financial statement decrease lower than retained profit in consolidated financial

statement. However, this situation makes the current share price has a higher

upside of 25.9%. We therefore reiterate our recommendation of BUY. In the

worst case scenario, we project that 2H12 will be the only quarter that ADVANC

pays dividend yield lower than 100% of the net profit, but dividend in 2H12 will

not be lower than B4 or a dividend yield of 2.0percent from the current share price.

However, compared with INTUCH, the parent company, which has a higher

upside of 46.4%, we still prefer INTUCH to ADVANC.