KGI Upgrades ICT Sector to ‘Overweight’ as Competition Eases

Telecom operators in Thailand are maintaining a favorable landscape by prioritizing quality growth over price competition, as evident in their bundled packages encompassing various services.

Advanced Info Service Public Company Limited (SET: ADVANC) has taken the lead in offering higher-value plans through costly FBB plans compared to True Corporation Public Company Limited (SET: TRUE), indicating a strategic shift towards premium offerings. KGI predicts a continuous increase in Average Revenue Per User (ARPU) until 2025 due to modest price hikes amid Thailand’s low regional yields.

Reports on an impending share restructuring between ADVANC and Intouch Holdings Public Company Limited (SET: INTUCH) could give potential long-term benefits for ADVANC in terms of enhanced profitability and dividend payouts.

Moreover, upcoming spectrum bidding is not expected to significantly affect the market dynamics, with KGI anticipating reduced competition in the bidding process by the second half of 2024.

The analyst projects a substantial surge in sector earnings for 2024, with TRUE positioned as a key contributor driven by synergy and ARPU growth. Meanwhile, ADVANC is set to benefit from lower costs after 3BB losses and sustained organic expansion.

The sector outlook has prompted KGI to upgrade the ICT sector to ‘Overweight’, citing easing competition, operational synergies, and potential positive revisions to 2024 guidance.

TRUE emerged as KGI’s top pick for the third quarter of 2024, anticipated to exceed market expectations on the back of accelerated synergy realization. Despite the positive outlook, potential downside risks include legal challenges at TRUE and ADVANC, integration expenses, and a resurgence of pricing battles in the market.