True, Jasmine to Pay $4.2 Billion for Thai Mobile Licenses

  • Bidding war sparks stock slump on concern 4G to boost costs
  • Thailand's biggest mobile operators fail to secure spectrum

True Corp. Pcl and Jasmine International Pcl will pay $4.2 billion for licenses to provide fourth-generation wireless services in Thailand after outbidding larger rivals Advanced Info Service Pcl and Total Access Communication Pcl in an auction in Bangkok that ran for almost four days.

True topped the bidding for the 900MHz spectrum with 76.3 billion baht ($2.11 billion) and Jasmine’s bid was valued at 75.7 billion baht, the regulator said. Total Access had the most to lose, because Advanced Info and True won licenses to offer 4G services on the 1800MHz spectrum at a similar auction last month.

The result may surprise investors who expected Advanced Info and Total Access to leverage their stronger balance sheets to accelerate their 4G network expansion and grab a larger share of the market for mobile data in Thailand,  which had about 86 million mobile-phone subscribers as of September. Shares of Total Access slumped 16 percent this week as investors judged that the high bid costs could erode earnings.

“Making a good return from the investment will be a struggle, so this could be the classic case of a winner’s curse,” said Maria Lapiz, an analyst at Maybank Kim Eng Securities (Thailand) Pcl. Average revenue per user will remain under pressure in 2016 as Thailand’s slowing economy limits demand for more costly mobile data services, she said.

DTAC Expansion

Total Access has three years before its current license expires, NBTC commissioner Prawit Leesatapornwongsa told reporters early on Saturday.

“It has to work on marketing strategies, and seek new frequency, and it can bid when its license expires in 2018,” Prawit said.

Total Access will use the funds that it planned to spend on a license to invest in its network and marketing campaigns for the company’s 3G and 4G services, CEO Lars-Ake Norling said in a statement Saturday. The company, known locally as DTAC, is confident that its existing bandwidth -- on the 2100MHz, 1800MHz and 850MHz spectrum -- is sufficient to provide high-speed data services to its subscribers, and it plans to expand nationwide 4G coverage in 2016, he said.

True, 18 percent owned by China Mobile Ltd. and controlled by Thailand’s Charoen Pokphand Group, will pay the equivalent of $3.2 billion for the two licenses it secured during the auctions, which may increase the need to raise future capital. The company earlier this month said it will spend 40 billion baht to expand its network, and expects to double the number of 4G users to more than 4 million over the next year.

Fresh Capital

“Its mobile-phone business is likely to become even more loss-making,” Maybank Kim Eng’s Lapiz said before the auction concluded. “And given other business segments also struggle to make profits, True could go into losses. A capital increase is highly likely.”

Thai mobile-phone subscribers will start moving to the new faster networks in February, and the number of 4G subscribers will reach 20 million by the end of next year, according to the NBTC. The auction was also a windfall for the country’s military government, which has pledged to use the $6.5 billion raised in recent months to help farmers cope with a crippling drought and slumping crop prices.

Thai companies began offering 3G services in mid-2013 after eight years of delays caused by legal battles and regulatory wrangling. In 2012, the Thai telecom regulator raised 41.6 billion baht in an auction for licenses of third-generation cellular services. Advanced Info, Total Access and True won those licenses. Total Access and True had already started offering services at speeds approaching 4G using existing spectrum.

“It will help drive Thailand toward the digital economy,” Minister of Information and Communication Technology Uttama Savanayana told reporters Friday in Bangkok. “Proceeds from the auction will also benefit all sectors in Thailand.”

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