Fitch: 2.3GHz Spectrum Deal Crucial for Challenges Remain

Stocks and Financial Services Press Releases Monday April 10, 2017 16:59
Bangkok--10 Apr--Fitch Ratings

Winning the 2.3GHz spectrum partnership contract with TOT Public Company Limited (TOT) is important to Total Access Communication Public Company Limited (DTAC; BBB/AA(tha)/Stable) as it would boost spectrum holdings, at least in the short term, says Fitch Ratings.

Nevertheless, this contract alone is unlikely to solve all DTAC's spectrum risk, as more spectrum will be required over the next two years to support its growing mobile operations over the medium term.

TOT opened a request for proposal (RFP) for its 2.3GHz spectrum in February 2017. Private mobile operators were required to submit proposals to TOT before end-March, and TOT will select the operator within 60 days of the RFP deadline, most likely in May 2017. Fitch expects key considerations for TOT are likely to include fees payable by private mobile operators and the network rollout plan over the eight-year contract period.

Fitch expects DTAC could be the potential winner among the three private mobile operators which participated in the beauty contest for the 2.3GHz spectrum contract, as DTAC needs the spectrum the most - and therefore has the greatest incentive to propose the most attractive terms to TOT.

DTAC needs new spectrum over the next two years to replace the 35MHz – of its total spectrum of 50MHz - which it is losing as its 2G concession expires in 2018. The 15MHz of 2.1GHz band spectrum it owns under the licence regime may not be enough to support the rapid increase in mobile traffic and technology upgrades in the medium term.

Fitch believes that DTAC's loss of market share to competitors over the past few years was partly a result of its inferior spectrum holding position. Additional spectrum and more network investment could help improve DTAC's network quality and slow down its decline in market share and service revenue.

Even if DTAC secures the 2.3GHz contract, we would expect the company would still need to participate in the auctions for 1.8GHz and 850MHz spectrum, which are likely in 2018, as it still largely relies on these frequencies to provide 3G and 4G services. Furthermore, 2.3GHz-compatable handsets are not popular in Thailand, and DTAC may need to offer a deep handset subsidy to encourage its subscribers to move to the new spectrum.

Fitch expects that any arrangements between TOT and a private-sector operator would involve an annual fee payment to TOT for the rights to use the 2.3GHz spectrum, similar to the partnership contract between Advanced Info Service Public Company Limited (AIS; BBB+/AA+(tha)/Stable) and TOT for 2.1GHz spectrum. Such additional cost may put pressure on DTAC's cash flows in the medium term. However, DTAC has moderate financial leverage and has suspended dividend payment for 2016's performance, so we expect that FFO-adjusted net leverage should remain below 2.5x (end-December 2016: 1.9x), in line with its current ratings.


Latest Press Release

Photo Release: EXIM Thailand Visits Xayaburi Hydroelectric Power Project

Mr. Nopporn Thepsithar (fifth left), Chairman of the Board of Executive Directors, Export-Import Bank of Thailand (EXIM Thailand) and Dr. Narongchai Akarasanee (center), former Minister of Energy, recently visited Xayaburi Hydroelectric Power Project...

Thailands Promotion of Advanced Technology and Eco-system Development Enables Local Producers to Fly Higher

Thailand has been experiencing a gradual shift from a manufacturing to a high-value manufacturing economy after the country has put all its efforts into promoting the use of advanced technology, science, and innovation in parallel with the development of...

Get 5-Baht Cashback when making payment via K PLUS for BTS tickets until April 30, 2019

To celebrate the latest QR Code payment service via K PLUS for one-way BTS tickets bought from ticket issuing machines at BTS Stations, KBank has teamed up with BTS to offer a cashback of 5 Baht/trip, which will be credited into the passenger's account...

OKEx Revisited Bangkok After Launch of Thai Baht Trading

OKEx, a Malta-based world-leading digital asset exchange, has made a stop-over to Bangkok to bring industry leaders together to exchange ideas on blockchain technology. In view of the fast-growing digital asset community in Thailand, OKEx has launched...

MFC launches new 6-month fund investing in global debt instruments, IPO 18 22 February 2019

Mr. Lim Chong Boon Dennis, President, MFC Asset Management Public Company Limited, announced today that MFC will be launching the MFC International Fixed Income Fund 6 Months Series 12 or I-FIX 6M12 during 18 – 22 February 2019. The Fund is a...

Related Topics