28 Sep 18

How investors view the telecoms industry on a gloomy day

On Sept 12, 2018, dtac shares plummeted by about 10 percent from 44 Baht to 39 Baht, right after the National Broadcasting and Telecommunications Commission (NBTC) denied dtac a remedy period to the 850 MHz subscribers of Total Access Communication. (As of writing, dtac’s stock is 46 baht.)

The move reflects how investors view the listed company, which can cause stock prices to rise or fall. This reflects a broader sense of stakeholders and responsibility that a listed company is obliged to take. And this is where the investor relations department of a company comes into play.

Since dtac was listed in the Stock Exchange of Thailand in 2007, there were crises along the way until today, which resulted in stock price fluctuation. And the team who manage situations by communicating effectively with shareholders and investors is the Investor Relations (IR) department, led by Khun Chavit Sangudomlert.

An engineer-turned-banker

“I’m obsessed with numbers and investment.” said Mr.Chavit. He graduated from the Faculty of Engineering, Chulalongkorn University. He joined the banking industry right after his graduation as a creditor and continuing enjoying the world of finance until today as a Head of Investor Relations at dtac.

Investor Relations department is under the Finance Group, responsible for helping investors to understand the company’s direction, so as to achieve the optimum share price, reflect the fundamental value of the company and maintain the company’s financial liquidity.

“It’s important for businesses to communicate accurately, transparently and fairly with domestic and regional institutional investors and retail investors, who hold a combined share of almost 30%. We try to interest them with updated stories about dtac, such as business strategy, strategic direction, market positioning and dividend payout policy. Those will be beneficial for the future fund raising if necessary,” he said.

IR acts as a portal, a passage through which investors and company executives communicate. The department will gather information from related internal units and share that information appropriately. They are expected to drive the value of shares based on current and predicted investor wants and needs. If investor relations break down, the share price will not reflect the company’s fair value, having an impact on its trustworthiness and stability.

Company’s storyteller

There are various formats for investor communications, in order to provide fair access to information. For instance, site visits, annual general meetings, investor roadshows, and investor fairs in the world’s financial hubs, namely Hong Kong, Singapore and London.

“When we meet investors, we face a variety of questions, depending on what’s hot at the moment,” said Mr.Chavit. “The challenges in IR is uncontrollable factors, such as regulatory revision, fierce competition in the market itself and industry disruption. What we can do is to explain incidents at our best.

Therefore, an IR person must be a good storyteller, not just an information collector.”

When bull becomes a bear in telcos

Over 30 years of telecom industry, it has passed through a number of tough time and crises as same as dtac. Back in 1997, when the Asian financial crises struck, dtac was hugely affected from currency exchange loss as the Thai baht devalued swiftly and lost more than half of its value. The company’s external loan debt doubled overnight.

“At that time, we deeply struggled financially. But we passed through in the end. Fortunately, the situation of telecom market bounced back drastically thanks to the exponential growth in the pre-paid segment. Subscriber base increased from single digit millions to double digits, leading to a healthy financial position. Currently, dtac’s net debt stood at 0.6 times against cash flow,” says Mr. Chavit.

In the aftermath of the financial crisis, operators enjoyed a boom in the telecom industry, but legal disputes, conflict and uncertainties still continued along bumpy road. Before the 3G auctions in 2012, telecoms industry peaked, reflected in share prices skyrocketing across the sector as investors viewed the benefit of the emergence of licensing regime.

dtac’s share price peaked at 130 baht per share. In 2015, however, shares in the four bidding telcos fell to a three-year low as the 900 MHz auction ended, amid concern at the future costs and competition in the sector. The 900 MHz auctions achieved the world’s highest spectrum price at 76 billion baht for 5x2 MHz, at the end of a nail-biting 3-days 3-nights bidding process.

As a consequence of the worsening situation in the past couple of years, investors’ perspective in the sector have changed dramatically, from bull market to bear market. However, they started seeing a better sign due to more rational competition.

Presently, the telecom industry remains positive, aligned with GDP growth at four percent annually. Internet usage behavior and the government’s digital economy will vigorously attract more investment in the near future.

“Investors primarily take the regulation environment into consideration. If it becomes more certain, telecom sector will be more attractive for both domestic and global investment,” Mr.Chavit added. “dtac’s financial health is excellent thanks to our cost-optimization policy, allowing us to make future investments. Investors are keeping their eyes on us how we grab a number of customers back and get back to growth again. This will be a key driver in raising share price in the future.”

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