Bangkok--15 Aug--Fitch Ratings
Fitch Ratings expects the growth of Thai mobile telecoms service revenue to accelerate in 2H19 as competition in the sector has eased. In 2Q19, all major mobile operators in Thailand gradually started to phase out the generous fixed-speed and unlimited prepaid data plans that were launched in 2018. Nevertheless, sector EBITDA could remain flat in 2019, as we expect revenue growth will be offset by an increase in network-related costs.
Fitch expects Advanced Info Service Public Company Limited's (AIS; BBB+/AA+(tha)/Stable) mobile service revenue growth to improve in 2H19 as the company continues to move its subscribers with fixed-speed and unlimited data plans to higher-priced plans. We believe AIS still has a lot of prepaid subscribers left under these unlimited data plans, which will gradually expire in 2H19. In 2Q19, AIS's mobile service revenue grew by 5.5% yoy, compared with 1.2% growth in 1Q19.
Fitch expects mobile service revenue of Total Access Communication Public Company Limited (DTAC; BBB/AA(tha)/Stable) to continue to drop in 2019, but at a slower rate of 1%-2%, compared with the 5.8% fall in 2018. The more rational price competition, its recent spectrum acquisition and an ongoing network investment should help improve DTAC's service and network coverage and revenue growth in 2H19. In 2Q19, DTAC's service revenue declined by 5.3% yoy, compared with a 7.1% drop in 1Q19.
Fitch expects Thai telcos' operating profit to remain under pressure due to an increase network operating costs as operators continue to expand their networks. DTAC's EBITDA is likely to drop by 10%-11% to THB24.5 billion in 2019 from THB27.6 billion in 2018. DTAC's earnings will also be affected the payments to CAT Telecom Public Company Limited for equipment rental and to TOT Public Company Limited for use of the 2.3GHz spectrum. In 1H19, DTAC's proportion of network operating expense to service revenue increased to 25.9% from 18.4% in 2018. We expect DTAC's EBITDA margin to decline to 34%-35% in 2019 from 37.8% in 2018 (1H19: 35%).
AIS should continue to benefit from its strategy to diversify its telecoms business into fixed-line broadband. Its fixed-line broadband has shown greater stability and growth prospects than mobile over the past few years. Nevertheless, we expect its EBITDA to be flat at around THB74 billion in 2019 (2018: THB73.8 billion), as its service revenue growth could be offset by an increase in costs. In 1H19, AIS's network operating expense increased by 19% yoy, outpacing the service revenue growth of 6.1%, while its EBITDA margin dropped to 42.7% in 1H19 from 43.5% in 2018.