KGI elevates ICT sector to ‘Overweight’ as competition eases

Telecom operators in Thailand maintain a favorable situation by focusing on increasing quality at the expense of price competition, which is evident in the packages they offer including various services.

Advanced Info Service Public Limited Liability Company (SET: Advanced) has taken the lead in offering higher value plans through its high-cost FBB plans as compared to True Corporation Public Company Limited (SET: TRUE), indicating a strategic shift toward premium offerings. KGI projects continued growth in average revenue per user (ARPU) through 2025 due to modest price increases amid low regional yields in Thailand.

Reports of an upcoming share restructuring between ADVANC and Intouch Holdings Public Company Limited (SET: CONTACT) could provide ADVANC with potential long-term benefits in the form of increased profitability and dividend payments.

Furthermore, the upcoming frequency tenders are not expected to have a significant impact on market dynamics, and KGI expects competition in the tender process to decrease by the second half of 2024.

The analyst is forecasting a significant increase in sector earnings in 2024, with TRUE positioned as a key contributor driven by synergies and ARPU growth. Meanwhile, ADVANC is set to benefit from lower costs following 3BB losses and continued organic expansion.

The sector outlook prompted KGI to upgrade its ICT sector rating to “Overweight,” citing easing competition, operational synergies and potential positive outlook revisions for 2024.

TRUE emerged as KGI’s top pick for Q3 2024, expecting to outperform market expectations with accelerated synergy realization. Despite the positive outlook, potential downside risks include regulatory challenges at TRUE and ADVANC, integration expenses, and a resurgence of pricing battles in the market.