Mobile phone firms flock to Thailand
Bloomberg News Service
BANGKOK, Thailand — When Nipa Suksomkit, a grocery shop owner in a small rice-growing village in northeastern Thailand, sent her daughter to university in Bangkok 375 miles away, her monthly phone bill ballooned to a sixth of her income.
Not about to change her stripes as a traditional Thai mother, Nipa took the only other recourse available to keep in touch with her daughter: she joined the wireless age.
The 47-year-old shopkeeper in Ubonratchathani village bought her first mobile two months ago and cut her 2000-baht ($44) monthly phone bill in half. "I never thought of buying a mobile phone until I realized it's a much cheaper way to call my daughter," she said.
Nipa and other people who think of phones as wall attachments are the target of aggressive pricing campaigns by Advanced Info Service Pcl and Total Access Communication Pcl as Thailand's two largest mobile operators battle for customers in a market that doubled last year and may double again this year.
The price of the cheapest handset has been cut more than half the past year to below 5,000 baht and registration fees of about 4,000 baht have been waived.
"A few years ago, mobile phones were viewed as devices for the wealthy," said Athorn Techatantiwong, marketing manager at Advanced Info Service Pcl. "Nowadays, prices have fallen to the point where mobiles are available at most convenience stores."
Subscriber surge
Advanced Info's new subscribers in the first four months of this year tripled from a year earlier, giving the company 2.6 million users as they took advantage of falling prices. Profit in the first quarter doubled to 2.3 billion baht.
Total Access new users in the January-April period almost quadrupled, to 1.8 million. First-quarter profit jumped 34 percent to 777 million baht.
Advanced Info shares were the top performers among major Asian mobile phone operators the past year, gaining 19.7 percent. Total Access shares, though down 25 percent in the same period, were the region's second-best performer, beating NTT Docomo Inc. of Japan and China Mobile Ltd. of Hong Kong.
Advanced Info stock Friday rose 1.4 percent to 442 baht, a three-month high. Total Access, whose shares are traded on Singapore's stock exchange, increased 3 percent.
Since Thailand built its first cellular transmission station about a decade ago, the cellular is fast catching up on the wall or table phone in Thailand. About 4.4 million people, or 7 percent of the population, are now mobile phone users, compared with almost 8 million fixed-line phones installed.
Accelerating growth
Still, mobile phone use in Thailand is low compared with penetration levels of 25 percent in Malay-
sia, 70 percent in Singapore and 58 percent in South Korea, according to a research report by securities firm Worldsec International Ltd.
"There is huge growth potential for mobile phone operators," said Panich Vikitsreth, chief investment officer at Ayudhya JF Asset Management Ltd, which manages about 30 billion baht ($660 million) in assets. "The penetration rate can easily double in the near future."
Growth in new subscribers has been so fast-paced that the Telephone Organization of Thailand, the state-owned phone company and utility regulator, is increasing the number of digits next month to accommodate demand for new phone numbers.
"The mobile phone sector is now entering the high-growth stage as the high barrier to entry is dropping and the larger percentage of the population is able to get a mobile phone," said Graeme Cunningham, an analyst at Asset Plus Securities Co Ltd., who expects mobile subscriptions to nearly double to 7 million users by the end of this year.
Discounting prices
Forecasts like that have attracted four international mobile phone operators to Thailand.
Norway's Telenor AS paid $720 million for a 30 percent stake in Total Access, which started the price war in February by waiving monthly mobile fees and introducing a flat rate of 3 baht a minute for nationwide calls.
Advanced Info is a fifth owned by Singapore Telecommunications Ltd., Southeast Asia's biggest phone company, and 40 percent by Shin Corp., a holding company controlled by Prime Minister Thaksin Shinawatra's family. Shin is also a partner in Digital Phone Co., a venture with Telekom Malaysia Bhd.
France Telecom's Orange SA has teamed up with fixed-line Thai phone operator TelecomAsia Pcl and will begin providing services later this year.
The four-way rivalry and discounting may bode ill for profits. Total Access's low flat rate and fee waiver prompted similar reductions by Advanced Info in April.
"It's important to maintain the earnings quality of new subscribers," Cunningham said. "You can't just add a bunch of new subscribers and add no value because it costs a certain amount to acquire the subscribers and it has to be paid back."
Rising advertising and promotion costs already are taking their toll. Total Access reported operating profit in the first quarter declined 12 percent as a 56 percent surge in costs offset a 36 percent gain from fees and sales.
"Competition has reached the point where companies will need deeper pockets to fund cuts in prices and calling rates," Athorn said. "That won't be good. In the end, maybe nobody will make money."
