dtac focuses on improving network coverage and capacity-
Total Access Communications (dtac) recently reported its quarterly earnings for the three-month period ended June 2014, declaring that profit growth remained flat while revenues declined. This occurred on account of a decline in the use of traditional mobile services such as voice and SMS, although political uncertainty in Thailand also played a role. Further, the average revenue per user declined by 13.51 per cent year on year for the quarter ended June 2014, on account of reduction in interconnection charges in 2013.
However, there were several positives as well. The most notable among them was the significant rise in the uptake of data services, whose share in total service revenues increased from 21.6 per cent to 31.28 per cent year on year. This can be attributed to the increasing proliferation of smartphones, expansion of the 3G network and introduction of the long term evolution (LTE) network, the provision of affordable smartphone bundled plans, and aggressive marketing campaigns.
Driving mobile data adoption through network expansion
dtac has been taking several steps to encourage the adoption of mobile internet under its Internet For All initiative. The company had launched 4G long term evolution services using spectrum in the 2100 MHz band in May 2014 in select areas of Bangkok. The services have been made available through 300 live base stations covering Silom, Sukhumvit, Rama 4, and Sathorn among others. dtac made use of Alcatel-Lucent’s 1830 photonic service switch (PSS) wave division multiplexing/ optical transport network platform along with the intelligent generalised multiprotocol label switching (GMPLS) control plane. The company has now extended coverage of the 2100 MHz network to 80 per cent of the population. dtac is also planning to upgrade its 100G network to 400G in the near future, to support the rising bandwidth requirements of heavy data users.
Further, dtac signed network sharing agreements with True Move. The agreement will allow dtac to use True Move’s 3G network. It will also enable the company to reduce its network capex and offer better network coverage and services to its users.
3G services witnessing significant uptake
The company’s mobile internet initiative is showing positive results. The data subscriber base increased from 6 million users in 2011 to 11 million in 2013, while revenues from mobile data services rose from THB 5 billion to THB 17 billion. With this, the company also witnessed an increase in the total number of subscribers from 27.2 million as of June 2012 to 28 million as of June 2014.
The technology-driven growth plans of the company are likely to be supplemented by a growth in smartphone penetration in the country and the resultant increase in the number of mobile data users. dtac’s smartphone penetration stood at about 33 per cent at the end of 2013, with absolute numbers increasing from 4 million in 2011 to 9 million in 2013.
Key issues and challenges
The company’s growth faces a few key risks.
Financial risks: dtac is exposed to fluctuations in exchange rates, interest rates in the market, and any slowdown in global economic activity. A part of the company’s debt is denominated in foreign currencies. This involves long-term loans related to procurement of equipment, etc. As of December 2013, the company’s liabilities in foreign currencies stood at THB 460.32 million. However, the company has entered into cross-currency swap contracts to hedge this exposure.
Operational risks: dtac is also exposed to the risk of any regulatory or policy changes imposed by the government. For instance, the telecom regulator, the National Broadcasting and Telecommunications Commission had to postpone the auction for spectrum in the 1800 MHz band from September 2014 to July 2015 on account of the directive of the National Council for Peace and Order. The spectrum auction had been eagerly awaited by dtac as it would have allowed faster roll-out of 4G services. However, due to the delay in the auction, dtac will have to continue to serve existing and new 4G customers using spectrum in the 2100 MHz, which may affect both quality of service and user experience. dtac also faces uncertainty regarding the spectrum in the 1800 MHz, leased from CAT Telecom. At present, the company offers 2G services using this spectrum. If the company is unable to secure spectrum in the auction, it will have to shift users to other spectrum bands, which will result in network congestion and therefore, subscriber churn.
The way forward
Despite operational risks, dtac is poised for significant growth because of the rising adoption of data services. To boost its data revenues, the company has earmarked an investment of THB 13 billion to double its 3G network coverage. In this regard, the company is planning to set up a total of 1,000 3G base transceiver stations (BTSs) in Greater Bangkok and 10 large provinces to increase its penetration in the market and pave the way for much stronger growth.
Meanwhile, the company’s decision to delist shares from the Singapore Stock Exchange is likely to be beneficial as it will reduce legal and compliance costs, which can be used to meet capital and operational expenditure.
Further, dtac is planning to improve the efficiency of its network through more sharing agreements with other operators, especially Advance Info Service. The company is looking at sharing more BTSs (about 400) by end-2014.
