The final price of the 3G-2.1GHz spectrum licences in the upcoming auction is expected to be Bt16 billion each, according to a telecom analyst at Phatra Securities.
Advanced Info Service (AIS) and Total Access Communications (DTAC) will each pay an estimated final price of Bt16 billion for the licence, according to the analyst's recent report, which mentioned only AIS and DTAC.
The National Telecommunication Commission (NTC) has set the starting price of the licences at Bt12.8 billion each. Only two licences will be issued in the first auction round on September 20 while the third licence will be issued in the second round, 90 days after the first auction ends.
The three bidders for the licences are Advanced Wireless Network of AIS, DTAC Internet Service of DTAC, and Real Move of True Corp.
While the three bidders are expected to prefer to obtain the licences in the first auction, the analyst assumed that they might not compete fiercely for the licences as they still have a chance to get the third licence in the second round.
Although the licences will reduce their regulatory fees and are positive for their long-term valuation, they will dilute earnings in the near term due to network investment, start-up costs and slow migration of customers from the concessions to the licences in the initial stage.
Telecom operators who can obtain the licences will migrate their customers from the concessions to the licences to save the regulatory cost. The concession cost for each of them will average 25 per cent of annual revenue, while the licence fee costs them 6 per cent of annual revenue.
Due to 3G network investment and business start-up costs, the analyst expects slow earnings growth of 2.3 per cent in 2011 and 6.4 per cent in 2012 for AIS.
AIS' earnings growth is projected to surge to 9.9 per cent in 2013 and 13.8 per cent in 2014 after the customers' migration to the licence reaches a certain level. Although DTAC is expected to be the biggest beneficiary of the 3G licence, due to greater savings in regulatory fees, the analyst expects a negative impact on its short-term earnings.
With the 3G licence, DTAC's pre-exceptional profit is expected to decline by 13.6 per cent in 2011 and bounce back to a slow growth of 5.1 per cent in 2012. DTAC's earnings growth is expected to accelerate to 22.2 per cent in 2013 when the subscriber migration reaches critical mass.
One reason why DTAC's short-term earnings are expected to be weaker than AIS's is that DTAC's concession fee will increase from 25 per cent of gross revenue to 30 per cent from the fourth quarter of 2011.