TRIS Rating sees growth in mobile services sector driven by data traffic and economy. Delay in 3G licenses and running-out concessions force operators to adapt, reshaping competitive paradigm and dashing hope for a level playing field.
TRIS Rating Co., Ltd. expects the mobile phone services sector to show revenue growth of 4%-5% in 2011. The same drivers as in 2010 - - demand for data services and the economy - - will continue to push market growth. Price competition in the non-voice segment is expected to be moderate, thanks to a sharp expansion in demand. Revenue from data traffic is expected to grow by 20%-30% in 2011. Even though the 3G segment will take off more aggressively, the growth will not be strong enough to lift the credit profiles of the three major firms in the near term. Voice revenue is likely to be flat compared with the 2010 levels.
TRIS Rating cautioned that the continuing delay in the 3G license auctions together with the expiring concessions could profoundly shift the industry’s competitive paradigm and eliminate the hope of bringing the industry back to a level playing field. Currently, operators no longer see their sustainable competitive advantages being based on a firm’s individual, stand-alone capability. Business changes by the concession owners are seen by the private firms as crucial complementary aspects of their strategies. CAT Telecom PLC’s (CAT) 3G network rollout could surpass the extent of TOT PLC’s (TOT) efforts in 2011, giving True Corporation PLC (TRUE) an edge in data capacity. TRUE could also own parts of the 3G network, giving it a different investment incentive than the incentives of operators under the build-transfer-operate (BTO) concessions. Advanced Info Services PLC (ADVANC) and Total Access Communication PLC (DTAC) are now working fervently to exploit all possible avenues of collaboration with TOT, CAT, and other telecom-related private operators.
TRIS Rating also commented that the existing infrastructure of the telecom industry does not appear to support a robust mobile virtual network operator (MVNO) business model. Nowadays, the distribution channels and customer service quality are crucial elements needed to build and retain a subscriber base. If MNVOs compete on tariff alone, they would face difficulty in attracting new clients and building customer loyalty. An MVNO with a small clientele also faces a risk of being a net
interconnection charge (IC) payer. It will be a challenge for an MVNO to offer tariff rates high enough to cover IC net-pay positions yet remain competitive against the incumbent firms’ near-zero tariff rates for on-net calls. Given that there are very few companies equipped with the MVNO capabilities needed to be successful, TOT and CAT are left with no choice but to collaborate with just a few private operators. As the extent of collaboration increases, the relationship looks increasingly like a reverse concession, in which a state agency shoulders the cost of a network rollout for a single private operator, instead of the other way around.
The regulatory problems in the telecom industry reflect the lack of clarity in the interpretations of the laws themselves and the fast pace of technological advancements that outstrips political bureaucratic processes. TRIS Rating believed that a solution would require a compromise between government entities and private firms without compromising the public interest. This scenario is highly unlikely in the near to medium term. The auction of the 3G licenses in 2011 seems unlikely. The chance for successful formation of the National Broadcasting and Telecommunications Commission (NBTC) by year end is also slim. The outcome of the mid-year general election is another wild card that could drastically shift the direction of regulatory developments.
TRIS Rating’s issue of concern in 2011 is TRUE’s 3G network-rollout plan. Although TRUE announced on 28 March 2011 its plan to raise Bt13.2 billion via a right offering to finance the investments and improve data service capability, the company is still facing the debt refinancing risk over the next 2-3 years.
Currently, telecom operators assigned ratings by TRIS Rating are ADVANC (AA/Stable), DTAC (AA-/Stable), and TRUE Corporation PLC (TRUE) (BBB/Negative). -- End
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