DTAC plays down True's surge

Bangkok Post (29 November 2007)



The second-ranked mobile-phone operator DTAC has played down a threat from third-ranked True Move, which had a surprising surge in its net subscriber base in the third quarter of this year, saying the sharp increase was merely due to a new calculation method and accounting changes. The response came after True Move had vowed to dethrone DTAC as the country's second-largest operator within the next few years.

True Move reported a sharp rise in the number of its new customers of 2.1 million in the third quarter, translating into a 35% market share and bringing its total to 12 million.

DTAC, meanwhile, had 400,000 net new subscribers in the three months to Sept 30 with a total of 16 million customers, while the market leader AIS had 800,000 net new customers in the third quarter, bringing its total to 23 million.

''The unusually high number of True Move's new subscribers came at its own expense, which would result in a higher financial burden and cash-flow constraints,'' said DTAC chief commercial officer Thana Thienachariya.

He said that while True Move had a high number of new subscribers, it posted a decline in revenue. By comparison, DTAC reported a 3% growth rate in its revenue in the quarter.

True Move currently has a 22% share in the mobile market in terms of the number of customers, but accounts for only 15% in terms of revenue, compared to 31% and 32% respectively for DTAC.

Mr Thana said that retaining a customer generally cost an operator between US$3 and $4, plus other expenses including the SIM card and numbering fee. DTAC has churn of about two million customers moving to and from other services every three months. ''This means if we add days to the customers, we would have an additional three million customers each quarter,'' he said.

Mr Thana said True Move had extended its validity period for inactive customers from 18 days to 45 days.

He also said that DTAC's major shareholder, Telenor of Norway, was not concerned about the the threat from True Move and insisted DTAC's goal was clear: to improve its bottom line for sustainable growth instead of looking to expand its subscriber base only.

However, Mr Thana acknowledged that DTAC was not as strong in the high-end and teen segments. AIS has a market share of up to 80% in the high-end segment, followed by DTAC with 15% and True Move at 5%.

DTAC plans to focus on high-end customers in 2008 by offering luxury services such as international roaming, with the aim of increasing its the market share to 25% next year, he said.

SCB: Baht could be closer to 32 next year as US dollar falls

Bangkok Post (29 November 2007)

The baht is likely to appreciate by 4% to 6% against the US dollar in 2008, reaching 32.30 by the end of next year, according to Siam Commercial Bank.

Pakorn Peetathawatchai, an SCB executive vice-president, said interest rates were also likely to turn upward in 2008, with the central bank's one-day repurchase rate rising a half-point to 3.75% starting from the third quarter of next year.

''The trend is for the US dollar to continue to depreciate in 2008,'' he said at an economics seminar held by the bank yesterday.

The baht's projected rise to 32.30 to the US dollar would be 1.50 baht stronger than the rate of 33.80 forecast at the end of this year.

Dr Pakorn said the appreciation would come even with continued intervention by the Bank of Thailand in the currency market to curb baht gains.

The baht, which was quoted at 33.80 to the dollar yesterday, has risen 6.1% since the beginning of the year and 17.6% since the start of 2006 thanks to steady current account surpluses and weakness in the greenback.

Central bank intervention has helped push the country's foreign reserves to $83.5 billion as of Nov 16, excluding another $18.8 billion in net forward contracts.

Dr Pakorn said interest rates would rise by at least 50 basis points in 2008 as the central bank moves to curb rising inflationary pressure.

Domestic interest rates would outpace US rates, he said.

The Federal Reserve was likely to cut its short-term rate further to 3.5% in the first half of 2008 to revive the slowing US economy and ease market tensions over the sub-prime mortgage crisis, Dr Pakorn added.

Fiscal expansion seen as key

The Nation (29 November 2007)

Focus on domestic demand in light of sub-prime effects, seminar hears

A seminar on the economy yesterday was dominated by advice to the new government - one month before it is elected - on how it should prepare to offset the effects of the US sub-prime crisis.

BankThai executive Banluesak Pussarangsee said the new government should implement fiscal expansion to stimulate domestic consumption. This, he said, would offset the expected decline in overseas demand because of ongoing problems in the US security-mortgage market.

Speaking at a seminar entitled "The Thai economy after the general election", he said the new government should focus on domestic demand because the world economy was likely to be affected by the US sub-prime problem and the possibility of a bubble-burst in China.

Thailand is unlikely to continue enjoying high export growth next year, he said.

While some economists believe that the economy will not be affected by the sub-prime problem in the US, Banluesak said he did not believe in the "degrouping" theory.

US sub-prime problems aside, he said the economy might be affected by a bubble-burst in China, which could happen in a couple of years.

He said monetary policy would not help much to stimulate the economy because people would become more cautious in seeking loans.

Banluesak said the world economy was likely to be affected by various factors: the European Union's economy could be affected by the continuing appreciation of the euro against the dollar, while the Japanese economy might not perform as well as expected.

The sub-prime crisis in the US could lead to the foreclosure of two million home mortgages in the US early next year, he said. If this is the case, around US$600 billion to $700 billion (Bt20.31 trillion to Bt23.7 trillion) that these people have borrowed to finance their homes will disappear from the market, and this will affect exports to the US.

SCB Securities chief economist Sethaput Suthiwart-Narueput said the sub-prime crisis and a US economic slowdown would affect the economy for at least two years, while positive sentiment generated by next month's general election would also be affected in terms of its ability to boost the economy.

Sethaput said exporters sold 13 per cent of their goods directly to the US, while another 14 per cent are exported to the US via other markets. Therefore, exports will be affected by the sub-prime issue.

The sub-prime crisis, combined with the US economic slowdown, will also push the baht up and, when investors turn again to Asian markets, this will force the baht to rise even further, he said.
Sethaput said the sub-prime problem was yet to hit the bottom, because interest rates on sub-prime housing loans in the US will not peak until March next year. However, it will have had an adverse effect by then because the US housing market already has a stock of unsold houses equivalent to 10 months' supply.

Siam Commercial Bank executive Pakorn Pisatwatchai said the rising baht had diminished exporters' incomes. Although exports had risen by 12 per cent in dollar terms, they had grown by only 3 per cent in baht terms. Therefore, the Bank of Thailand was unlikely to adjust its policy interest rate at a meeting scheduled for December 11. The interest rate is unlikely to change until the second quarter of next year, he said.

Pakorn said the baht should be about 32.30 to the US dollar late next year, compared with 33.82 late this year.

One voice of optimism at the seminar came from rice traders' representative, Wichai Sriprasert, who said rice exporters might enjoy an increase in exports next year.

He said rice prices should also reach $1,000 per tonne, up from the present $300, because agricultural land was being converted to crops for making biodiesel, compounding the state of world rice stocks, which had fallen over the past three or four years because consumption had exceeded production.

Thai exporters had also gained an advantage over Vietnam - a major exporting rival - because that country's crop had been hit by typhoons.

However, Wichai warned the new government not to implement populist policies and, by doing so, ignore the market economy. This would mean the economy was unlikely to recover in a sustainable manner.

Chulalongkorn University economist Narong Petprasert said that although the agricultural sector had better prospects, no political parties had any clear policies on the agricultural and food industries.

Farmers should seize the opportunities arising from limitations on world cropping land because of large areas being allocated to growing alternative crops for energy. A limited supply of agricultural products would force food prices to rise at the expense of ordinary consumers.

Another Chulalongkorn University economist, Sompop Manasangsun, said the public should not expect the new government's term to be limited to only a year because it would make it even more difficult for it to manage economic policy.

If the new government is formed by a coalition of more than three parties, it will have difficulty running economic policy, he said. The new government's credibility will also depend on whether the new prime minister is accepted by international and domestic investors.

New govt 'won't last long enough'

The Nation (29 November 2007)

SET rebound expected late March from capital inflows, says broker

A leading securities broker yesterday predicted the general election will not be the economic turning point many expect, because a new government will not last long enough to create stability.

However, Bualuang Securities deputy managing director Padermpob Songkroh said he expected a stock-market rebound late next March, because of capital inflows. He expects the Stock exchange of Thailand (SET) Index to peak at 1,146 points next year.

He said the December 23 general election would not give a big boost to the Thai stock market, because the new government would last for only one-and-a-half or two years. Given such a short term in office, it was unlikely the government would be able to proceed with mega-infrastructure projects, which would be delayed further.

"We predict the next government will not last long - not more than two years - and this will have an effect on construction stocks. Without government stability, construction firms, which need long-term business plans, cannot map out such plans," Padermpob said.

Despite his denial of an economic rebound based on government stability, the broker said capital inflow would spark a market recovery late next March.

The SET slumped 10 per cent from its peak of 915.03 points late last month, due mainly to a sell-off by foreign investors on fresh anxiety over the US sub-prime crisis.

Despite the sharp decline, many analysts have expressed hope that the election will be a turning point for the bourse.

The SET yesterday closed 0.3 per cent lower at 820.52.

Padermpob said a flow of funds was expected to return to Asian stock markets, including the SET, in the first quarter - assuming the return on US 10-year bonds falls to 3.4 per cent and that the interest rate no longer attracts investors.

"The capital flow has been shifted from Asian stock markets to US 10-year bonds, which offer higher returns than do securities, but at a lower risk. When the return on US 10-year bonds declines 0.5 per cent, it will trigger a flow of funds into Asian bourses again," he said.
He estimates the earnings of listed companies will rise about 25 per cent next year, compared with zero growth this year.

CAT asks OAG to decide Huawei fine amount

Bangkok Post (29 November 2007)

CAT Telecom says it will not make a ruling on the fine to be imposed on Huawei Technologies but would rather ask the Office of the Attorney-General to decide on the amount. Gen Montri Sangkasarp, the board chairman, said that directors had decided not to make a ruling on the amount of fine to be imposed on the Chinese equipment supplier for the late delivery of the second phase of the CDMA mobile-phone network expansion project. Instead it would ask the Attorney-General by Dec 15 to proceed in accordance with established judicial procedure.

He said that CAT had to resort to the judicial procedure because it could not compromise with Huawei on the Rev A platform, which CAT considered as part of the original contract.

The CAT chairman said that under the contract, Huawei had to deliver the network in a form ready for use to CAT by Jan 26 but Huawei could not, and therefore had to be fined for the late delivery of the entire project amounting to more than 20 billion baht.

But Huawei views that the fine should be imposed only on the late delivery, from Jan 27 to Nov 15, of data software that is complementary and does not form part of the project, he said.

It views that the software is free and not an integral part, and that the CDMA network can start commercial service even without it.

The Chinese telecom supplier said it still could deliver 800 base stations under Phase 2 by schedule.

Huawei had delayed the delivery of the data software, citing the postponement of chipset deliveries from its overseas supplier.

But Gen Montri said that any buyer would want his order to meet what had been agreed on, and when the seller could not meet it, the buyer had the right not to accept the goods.

He added, however, that it was still uncertain if the dispute with Huawei could be settled within the term of this board, saying at least this board had performed its duty.

Huawei faces a 90-million-baht fine a day for late delivery.