Dtac facing further profit pressure - Mobile World Live

Dtac facing further profit pressure

13 FEB 2019

At a time of intense competition in the Thai market, Fitch Ratings predicted dtac will become more aggressive in its marketing activities to regain market share, a move likely to put further pressure on its profitability.

Higher discounts are likely to offset any savings from cost-optimisation plans announced last month. Its earnings will also be affected by payments to CAT Telecom for equipment rental and TOT for use of the 2.3GHz spectrum. Fitch expects dtac’s EBITDA margin to decline to 36.5 per cent in 2019 from 37.8 per cent in 2018.

Its mobile connections dropped from 28.2 million in Q1 2014 to 21.1 million in Q4 2018, with its market share falling from a peak of nearly 31 per cent to 23 per cent over that period, GSMA Intelligence data showed.

Challenges ahead
The agency said the latest quarterly results of dtac and AIS signal a challenging outlook for the sector, which is forecast to continue in 2019.

Unlimited data plans took a toll on both operators. Mobile revenue growth at AIS (the largest operator in the country) fell from 3.3 per cent in 2017 to 1.3 per cent in 2018, while dtac recorded a 0.7 per cent decline.

Aggressive marketing promotions, including handset subsidies, resulted in declines in profitability at both companies.

Fitch expects dtac’s market position to strengthen this year following it’s acquisition of 1800MHz and 900MHz spectrum. However, it said meaningful network improvements and brand rebuilding may take effect only after a few more quarters, suggesting EBITDA recovery will probably take place only in 2020.

Meanwhile, the ratings agency said AIS’ strategy to provide handset subsidies in only some geographical areas is likely to limit the impact on its EBITDA margin, noting the operator should continue to benefit from its strategy to diversify its telecoms business into fixed broadband.

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Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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