Thai telcos bracing for a challenging 2017

After a rough 2016 there is no respite in sight for Thailand’s telecoms sector, with operators still dealing with heavy costs accrued from recent 4G auctions, strict competition and OTT challengers.

AIS CEO Somchai Lertsuthivong as stating that he has never seen as challenging a year for the mobile sector as 2016, after nearly three decades of experience.

AIS and DTAC, which together have a revenue market share of around 80%, have both cut their financial forecasts for 2016 as a result of these challenges.

AIS expects to report an eibtda margin decline of between 37% and 38% in 2016 from 45.6% in 2015 due to the rising costs as well as one-off expenses related to the shutdown of its 2G network. Dtac expects its ebitda margin to decline to 27% to 30% compared to 31.8% in 2015.

Operators expect 2017 to be just as challenging. As well as high spectrum costs, operators have had to grapple with a surge in operating costs as they offered heavy subsidies including free 4G handsets to lure customers.

The sector will also have to deal with surging data consumption as 4G take-up increases. According to the report, Dtac plans to transition away from competing on price with heavy subsidies, and instead compete by offering a superior customer experience.

AIS is meanwhile responding to the OTT threat by pursuing more digital partnerships with local content providers and businesses. Operators are also exploring partnering with cable providers to offer triple-play services bundling internet, telephone and TV.