FSS Is Positive on ADVANC’s Move to Strengthen Competitiveness with DTAC-TRUE Mergeco

Finansia Syrus Securities (FSS) has a positive outlook on the move made by Advanced Info Service Public Company Limited (SET: ADVANC) yesterday to affirm its commitment on the acquisition of Jasmine Broadband Internet Infrastructure Fund (SET: JASIF) and Triple T Broadband Public Company Limited (TTTBB), despite the rejection by JASIF’s unitholders of the conditions calling for the termination of the rental assurance agreement and the amendment of the main lease agreement.

FSS stated that it saw this transaction as a good deal for ADVANC and the fixed broadband (FBB) market in Thailand. The broker believed this could reduce the intense competition that has caused the FBB market’s average revenue per user (ARPU) to decline by 3.5% on average for the past five years.

Moreover, the company would become the second biggest FBB operator in Thailand with its total subscriber count jumping from 2.1 million to 4.5 million. However, due to the accounting standard regarding the fibre optic cable rental agreement between TTTBB and JASIF, which caused JAS to book a loss in 9M22 of THB660 million, FSS believed this transaction should have a negative impact on ADVANC during 2023 to 2025 from 1) TTTBB’s losses; and 2) a higher financial expense equal to almost 5% of earnings estimate in 2023.

In addition, FSS stated that it believed this transaction, which should be completed in early 2Q23, offers a long-term benefit to ADVANC for scaling up its FBB business and boosting its competitiveness with the DTAC-TRUE Mergerco. Thus, the broker maintained its BUY recommendation with a target price at THB242, with a small expected upside from the transaction.