Total Access Communication
Q4 2012A: below SCBS; sets aggressive 3G target BUYTotal Access Communication Plc (DTAC)
Q4 2012A: Core profit slipped 5% YoY to Bt2.55bn, pulled down below SCBS by higherthan-
expected network opex and SG&A. 2012A core earnings slipped by 7% to Bt11bn
mainly from the rise in concession revenue sharing and network opex from 3G-850
MHz. It announced a Bt1.66 DPS for 4Q12, XD on Feb 21, payment Apr 12. For this year,
DTAC aggressively targets migrating ~30-38% of its 3G-2.1 GHz subs by yearend (after
launch in 2Q13) vs. our more conservative assumption of 25% of revenue. DTAC is
currently trading at the cheapest 2013 EV/EBTIDA of 8.5x vs. 10x for ADVANC and TRUE;
we continue to Buy with a Bt105 TP.
Q4 2012 core service revenue rose 12% YoY to Bt16.7bn, thanks to impressive growth
in non-voice revenue of 53% YoY to Bt4.4bn.DTAC has apparently been successful in rebuilding customer confidence, as it was able to raise subs by 1.5mn in 4Q12 to 25.3mn, after its campaigns designed to restore confidence in its network and no more outages. Of these, 2.3mn or 9% of
total were 3G-850 MHz subs.However, EBITDA margin dropped by 270 basis points YoY to 28.4% due to an increase in network opex and SG&A.
Bt34bn capex in 2013-2015. This is far below ADVANC's Bt70bn guidance and
arises out of DTAC's decision to lease BTO assets from CAT rather than build a
stand-alone network as ADVANC plans. Also, DTAC will continue to leverage off its
3G-850 MHz network since its concession is in effect until 2018 whereas ADVANC's
900 MHz concession will end in 2015.
8-10mn 3G-2.1 GHz subs by year-end. This implies sub migration of 30-38% by
yearend. We are more conservative, assuming that DTAC migrates 25% of revenue
to new 3G-2.1 GHz by end-2013. The speed of migration depends on: 1) network
expansion (which could be controlled by telcos), 2) capacity of mobile number
portability (which will definitely be expanded) and 3) consumer purchase of 3G
handsets, which may be the most challenging factor for telcos.
EBITDA margin to improve to 30-31% in 2013F. This is opposite to ADVANC's
guidance of a decline. We believe this is because DTAC has a chance for greater
savings in terms of regulatory cost since it is paying a higher share of its
concession revenue at 30% vs. ADVANC's 20-30%.