Thailand telecoms
9 January 2009
2009 outlook: Weathering the Storm
SETICT.BK/SETICT TB
BUY ADVANC, HOLD DTAC and SELL TRUE
We are revisiting our investment recommendations on big cap telecom stocks
including ADVANC, DTAC and TRUE. In conclusion, we reiterate our BUY rating
on ADVANC and our SELL rating on TRUE, whereas we are downgrading DTAC
to HOLD from Trading Buy. We have revised down the DCF based valuations of
ADVANC, DTAC and TRUE by 6%, 39% and 27% to Bt92, Bt33 and Bt2.33. As
a result, investors will be offered 31.6%, 13.4% and 30.4% of total returns
(upside potential plus dividend yield) by holding ADVANC, DTAC and TRUE
throughout 2009. ADVANC has become our top pick on the basis of 1) its fine
distribution of revenue in all regions, 2) its superior cost structure to offset softer
consumption and 3) its sustainable dividend yield.
Our main arguments on revenue contraction
We have cut industry revenue by 7.3% from our previous estimate, which
indicates a 3.7% YoY revenue contraction in 2009. We found that outgoing
minutes have grown a lot in the past 2-3 years and the average price point
appears extremely low. Given the weak consumer affordability, price increases
might result in minutes of use reduction or even customer churn. At the same
time, price reductions might not be compensated for by higher outgoing minutes.
Furthermore, the problems in the tourism industry will shrink IR and IDD usage,
which generate a higher than average EBITDA margin.
DTAC: Struggling in the middle
We are disappointed that DTAC has recently been losing its market response
capability, which should translate into a weak operation in 4Q08 and 1Q09. In
addition, the company admitted that most of its cash operating costs cannot be
tightened, which will erode its EBITDA margin in 2009. On the bright side, we are
positive to its dividend policy that aims at keeping the dividend per share from
the 2009 operation to be at least identical with the 2008 payout, using 30% of
net profit from 2008.
TRUE: Too weak to turnaround by itself
We are waiting to hear TRUE’s management’s thoughts on its convergence
strategy, the search for potential strategic partners or even a spin-off of some
businesses. We don’t think investors should subscribe the RO. The value dilution
impact will be huge if the proceeds are used to either retire other tranches of
bonds, to exercise the put option on BITCO shares or to invest in the 850MHz
network. However, we think it is too speculative to assume that TRUE will be
able to utilize the whole proceeds it will raise from the RO in February 2009 to
buy back True Move’s US$ bonds at over a 30% discount from face value.

Contents
Page
Investment summary
BUY ADVANC, HOLD DTAC and SELL TRUE 3
Revenue assumptions
Key arguments for revenue contraction in 2009 4
Cost initiatives
Who is in the best position to retain EBITDA margin? 11
Capital management
The ability to manage CAPEX, scheduled repayments and dividends 13
Financial projections
What’s changed from our earlier forecasts and the consensus estimates?
ADVANC: Best of the pack 17
DTAC: Struggling in the middle 20
TRUE: Too weak to turnaround by itself 23
Alternative valuations
Measurement of stock prices on historical bands of various multiples 27
Comparison of Thai telecom stocks with Asian telecoms 28
Risks 30
Company profile 31