Krungsri Sec. Rates “BUY” on TRUE, ADVANC on Improving Outlook in 2023

Krungsri Securities forecasts a dramatic shift in Thailand’s telecommunications sector with the merger of True Corporation and Total Access, commonly known as DTAC, two of the country’s leading phone operators.

The brokerage firm expects that this year onward, the earnings of the two remaining phone service providers, TRUE and Advanced Info Service (ADVANC or AIS), would improve as a result of less competition in the telecom market.

Based on easing competition and telco operators’ plans to focus on quality rather than pricing, Krungsri Securities expected that Average Revenue Per User (ARPU) will bottom out and stabilize this year. Given the recent developments, KSS is more bullish on the ICT sector, and while it rates both ADVANC (TP: THB250) and TRUE (TP: THB10) as BUY, analysts at KSS favor ADVANC because of its higher dividend yield and potential for growth towards the price target.

KSS said that the downcycle in the telecom sector since the start of the pandemic in 2020 has ended. The game-changer is the merger of TRUE and DTAC. In theory, pricing strategies are unnecessary in an oligopoly like Thailand’s telecom industry. Indeed, market leader ADVANC is weaning off pricing strategies by terminating its low-priced packages since 4Q22. And TRUE, which had been trying to gain market share through a pricing strategy, would have more postpaid and prepaid subs than ADVANC following the merger. Hence, the pricing strategy for TRUE appears unnecessary. On this note, Krungsri Securities expects earnings to grow by 7-8% YoY in 2023 after shrinking in the last three years.