Total Access Communication (DTAC): Cost controls set to support profit as hopes pinned on new frequency October 25, 2017 382

FY17 profit outlook upwardly revised due to effective costs controls DTAC fell slightly short of forecasts with a drop of 8.8% y-y and 19% q-q in 3QFY17 profit to Bt601mn, largely blaming lower–than–expected revenue. In this period, however, a drastic decrease in SG&A expenses (down 11% y-y but up 2.4% q-q) and satisfactory levels of EBITDA (up 7.2% y-y but down 2.9% q-q) reflect DTAC’s plan to manage profit. Subscriber numbers have declined at a worrying pace after DTAC lost 0.51mn subscribers from the previous quarter (prepaid subscribers decreased by 0.64mn but postpaid subscribers increased by 0.13mn).

We forecast its 4QFY17 performance will be better than a year earlier on assumptions that the slight downward trend in revenue will be offset by a higher EBITDA margin driven by (i) lower postpaid device subsidies following the shift to quality postpaid subscribers and (ii) a dramatic drop in SG&A expenses as a result of digital transformation. In this sense, we ratchet up our FY17 profit outlook for DTAC to Bt1,970mn, down 5.5% y-y. Note that we’ve not included costs from its partnership with TOT to jointly provide 4G services on TOT’s 2300MHz spectrum in our revision of the full-year profit as we believe there is potential for a delay in the launch of their joint service.

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