TELECOMMUNICATIONS
Although the telecom sector, especially broadband internet service, is regarded as essential infrastructure for people’s daily life and remote work during the pandemic, the revenue stream of telecom operators is under threat as purchasing power shrinks because of the pandemic, particularly in the low-end segment.
Telecom is an essential service for the whole economy, serving as a core infrastructure to support communication and business operations. During previous crises, the telecom sector appeared to face less of an impact compared with other sectors. The sector’s annual revenue growth rate is usually 1-2% higher than GDP growth.
For example, Thailand’s GDP plunged 6.1% year-on-year in 2020 and the sector’s revenue declined 4%.
In the first quarter of 2021, Advanced Info Services Plc (AIS), Thailand’s largest mobile operator by subscribers, booked 45.9 billion baht in revenue and 6.6 billion in net profit, while its key rival True Corporation earned 35.4 billion baht and racked up 581 million in losses.
Total Access Communication Plc (dtac) gained 20.5 billion baht with a profit of 822 million baht.
An executive of a major telecom operator who requested anonymity predicted earlier the pandemic would be under control by June, with the economy beginning to recover in the first or second quarter next year.
This forecast is unlikely because of delays in mass vaccination by at least a few months. The pandemic is now projected to ease by the end of this year.
Economic recovery is estimated to start in the first quarter of 2022, with normal business operations forecast for the final quarter of next year, some 3-4 months later than previously expected, according to analysts.
WORST-CASE PLAN
AIS chief executive Somchai Lertsutiwong said the company mapped out a plan to cope with the worst-case scenario regarding the pandemic, though it is convinced the government and public health sector should be able to improve the situation soon.
However, if the pandemic worsens, the company plans to review all its forecast figures, he said.
If the worst case happens, it would decrease consumer purchasing power and the telecom sector’s profit margin would be affected, Mr Somchai said.
This scenario would put telecom operators in a bind as the sector cannot stop investing to boost network capacity because this infrastructure is essential for business operations and the public’s work activities, he said.
MARKED PROFIT FALL
According to Kasikorn Securities (KS), mobile service revenue is expected to grow 2-3% in 2021, but carriers’ profits are estimated to fall 5-7%.
The revenue stream from fixed broadband internet service is expected to rise 4-5% in 2021, driven by strong demand from people working from home during the pandemic, the brokerage firm said.
KS indicated the penetration rate of fixed broadband internet is 54% of households nationwide, while the penetration of mobile service exceeds 100% as some people own more than one mobile device.
The brokerage firm said the fixed broadband market still has room to grow, especially the high-end segment, which has strong demand for heavy usage of broadband traffic for its business and work support.
Fixed broadband for the low-end segment as well as new subscribers are forecast to see a drop in average revenue per user (ARPU), said KS. Operators should offer a variety of packages to lure customers, said the brokerage.
Regarding the mobile segment, operators also face a decline in ARPU as customers in both prepaid and post-paid systems have been shifting to packages with lower tariffs since last year.
Mobile operators also suffered declining revenue from foreign tourists and international roaming services during the pandemic.
Revenues generated through mobile operators’ shops and service centres have decreased because fewer people visit these sites during the outbreak, according to KS.
HELP NEEDED FOR SMEs
Apart from disrupting people’s daily life and work, the pandemic has taken a heavy toll on around 700,000 small and medium-sized enterprises across the country.
The government has been urged to give them a hand to allow them to survive during this downturn, offering appropriate remedy measures.
“Every sector should come together to make the country stronger,” said Mr Somchai. “Bigger organisations should be supporting smaller organisations or small entrepreneurs, giving them the energy to continue.”
“The big fish must help the small fish, not eat them.”
The pandemic has impacted every sector, which is of great concern for the macroeconomy, he said.
“It is absolutely essential for every sector, and particularly large and powerful organisations, to pitch in and cooperate, offering every means at their disposal to deal with the crisis to ensure a recovery as soon as possible,” Mr Somchai said.