3QFY17 profit slightly below forecasts: 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 a steady rise in depreciation and amortization charges from 4G network investment. For the period, total revenue dipped 3.7% y‐y and 3.3% q‐q as voice and handset sales revenues faltered and DTAC lost more than 0.5mn subscribers from the previous quarter though data revenue continued to grow at a brisk pace. ARPU also ticked up both y‐y and q‐q after postpaid revenues surpassed those of prepaid services.

EBITDA still strong: For the quarter, EBITDA could be maintained at satisfactory levels, up 7.2% y‐y but down 2.9% q‐q and EBITDA margin remained high at 41.2%, similar to the level of 2QFY17 thanks chiefly to (i) lower postpaid device subsidies, (ii) a dramatic drop in SG&A expenses as a result of digital transformation and business model simplification, and (iii) lower USO and revenue share rates.

 ‘SELL’ call with FY17 target price of Bt48/share: Notwithstanding that its partnership with TOT to jointly provide 4G services on TOT’s 2300MHz spectrum may alleviate concerns about its dependence on the following two spectrum bands: 1800MHz and 850MHz due to expire and put up for auction in FY18, we believe DTAC may continue to face a number of risks from (i) a possible delay in the rollout of 4G services on TOT’s 2300MHz spectrum, (ii) a possible lost bid for 1800MHz and 850MHz frequencies, and (iii) a huger loss of prepaid subscribers. In addition, it also remains to be seen whether the recent launch of its fully digital mobile service called ‘Line Mobile’ in an effort to disrupt the market and strengthen its value‐for‐money position will be a success. On balance, we maintain a ‘SELL’ call on DTAC shares with a FY17 target price of Bt48/share.