True Corporation

The exciting next chapter has begun Neutral

True Corporation Plc (TRUE)

SCBS arranged a meeting with Khun Suphachai Cheravanont, president and CEO, and

Khun Noppadol Dej-udom, CFO of TRUE, on Jan 18. Highlights are given below:

New chapter for mobile business: from handicap to advantage

- From 2G handicap ... TRUE's 2G business has always been disadvantaged,

starting from the spectrum (12.5 MHz x 1800 MHz vs. DTAC's 50 MHz x 1800 MHz

and ADVANC's 17.5 MHz x 900 MHz), revenue sharing (30% vs. ADVANC's

25%average) to contract expiration (2013 vs. ADVANC's 2015 and DTAC's 2018).

- … to 3G advantage. There is now a dramatic shift. Though it received a

spectrum and a 15-year license in December that put it on equal footing with the

other private operators, it bests peers in: 1) 3G-850 MHz service, partnered by

CAT, that provides greater 3G network coverage, 2) first mover advantage.

Management said a survey shows TRUE to be #1 in terms of 3G for consumers.

- More coverage, more market share. In the mobile business, coverage equals

success. ADVANC, DTAC and True Move have 16K, 12K and 8.5K base stations

respectively and this is linked directly to market shares of 44%, 30% and 26% in

3Q12. In 1Q13, TRUE targets 13K base stations. Wider spectrum, broader coverage

and 3G brand recognition positions it to improve position.

- And a bigger pie. Unlike the US and Europe where most households have fixed

broadband access, NBTC data notes only 21% household broadband penetration

here in 3Q12. This leaves a very large market for broadband service via 3G. Mobile

internet will thus be the key to growth in the industry. Management expects

TRUE's non-voice revenue to grow by 70% in 2013, thus mobile service revenue

could rise by 19% in 2013 on stable voice revenue.

- Breakeven soon. Management expects 3G to break even in 2013, with the entire

mobile business in the black in 2014-2015. We are more conservative.

And a bigger pie. Unlike the US and Europe where most households have fixed

broadband access, NBTC data notes only 21% household broadband penetration

here in 3Q12. This leaves a very large market for broadband service via 3G. Mobile

internet will thus be the key to growth in the industry. Management expects

TRUE's non-voice revenue to grow by 70% in 2013, thus mobile service revenue

could rise by 19% in 2013 on stable voice revenue.

- Breakeven soon. Management expects 3G to break even in 2013, with the entire

mobile business in the black in 2014-2015. We are more conservative.

True Online to outgrow the market. TRUE expects broadband penetration to reach

23% or 4.8mn households by 2013, with TRUE riding in tandem with target subs of

1.9mn (from 1.5mn as of 3Q12). TRUE is using DOCSIS 3.0 technology to support tripleplay

services: broadband, voice and pay TV via cable. When questioned about fiber-tothe-

home (FTTH), the response was that customers are unlikely to notice the speed

difference between DOCSIS 3.0 (up to 600 Mbps) and FTTH (up to 1 Gbps) and the FTTH

router is still quite expensive. Whe the FTTH router price falls, TRUE is ready for FTTH.

Pay TV strengthened by content. TRUE continues to strengthen this with worldclass

sports, entertainment and other content including more HD channels in order to

maintain its premium market. For the mass market, TRUE will adopt a prepaid system

similar to the mobile business. Of its three major business groups, pay TV is our least

favorite, since the growth in the industry is matched by the growth in competitors.

More positive LT view. We are more positive on TRUE after this event, encouraged

by its 3G advantage and opportunity to improve its position (and market share) in the

mobile industry. Although we have not revised our estimates, 2013 DCF-derived TP of

Bt5.8 and Neutral rating yet, this meeting provided upside risks to projections.