Competition in Thai fixed-line broadband intensifies: Fitch

State telecom operator worst hit by entry of new player.

Fitch Ratings expects competition in Thailand's fixed-line broadband (FBB) industry to intensify for the rest of 2016 and 2017.

Advanced Info Service Public Company Limited , the largest mobile phone operator in Thailand, entered the broadband market in 2015 and is aggressive on pricing as it aims to be one of the major FBB operators in Thailand in the next few years.

According to Fitch, TOT Public Company Limited (TOT), the state telecom operator and the third-largest FBB operator, is likely to feel the most pressure as it continues to lose subscriber market share to competitors, including True Corporation Public Company Limited (True), Jasmin International Public Company Limited (Jasmin) and AIS.

True is the country's third-largest mobile phone operator and the largest FBB operator with 2.6 million FBB subscribers - around 38% subscriber market share at end-2015.

Jasmin is the second-largest operator with 32% market share, followed by TOT with 21%.

TOT's subscriber market share declined from 31% at end-4Q13.

Fitch expects the Thai FBB market will continue to grow strongly in the medium term as the country's FBB penetration is low at around 30% of households in 2015.

"The growth in distribution of premium video content via the internet and rising consumption of media online should drive demand for data and higher broadband speeds, which will support the take-up of new fibre technology (FTTx)," it said.

According to Fitch, AIS's entry into the market and its offering of subscription packages with higher speeds at prices similar to those of its competitors should drive growth in new FBB subscriptions. However, it notes that it could also trigger price competition among operators, which would dampen the industry's average revenue per user (ARPU) and revenue growth.

AIS's strategy is to provide superior FTTx technology, which offers higher speeds and more stable connections than ADSL technology, which is the main technology used in the Thai FBB market.

While AIS's FBB subscriber base remains low at around 200,000 subscribers at end-2Q16, accounting for around 3% of the market, the company is targeting 300,000 subscribers by end-2016 and aims to become second-largest FBB operator within five years.

Fitch believes that the demand for high-speed connections and new fibre technology adoption should favour operators with broad and deep networks that can provide good coverage and reliable service.

Fitch said that the operators who can provide various telecom services, such as fixed and mobile services, including AIS and True, should be better placed to differentiate their offerings by bundling services, such as mobile phone for AIS, and pay-TV and mobile phone for True. This should help reduce churn as competition intensifies, it said.

"We think that TOT's market position would be most affected by intense competition as it only offers FBB service, and the company has been slower than its competitors in rolling out new fibre technology. Meanwhile, Jasmin's strategy to focus on the less competitive market upcountry should help mitigate risks, at least in the short term," it added. 

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