Thaicom (THCOM) was established in 1991 when it entered into a 30-year Domestic Communication Satellite Operating Agreement with the Ministry of Information and Communication Technology (MICT). Under the agreement, the company has the right to build, launch and operate satellites with a requirement to pay the MICT an agreed upon step-up percentage of its annual gross revenue earned from the transponder business. In addition, the agreement also requires that THCOM transfer ownership of the satellites, satellite control stations, and all related operational equipment to the MICT once the construction and installation are complete. The agreement will be ended in 2021. THCOM has been listed on the Stock Exchange of Thailand (SET) since 1994. Shin Corporation (INTUCH), the major shareholder, held a 41.1% stake in the company as of February 2014. Since its inception, THCOM has launched six satellites, with Thaicom 4 (also known as IPSTAR), Thaicom 5 and the recently launched Thaicom 6 currently in service. In addition to its main earth control station, THCOM also provides high-quality satellite service facilities. At present, the satellite business is the firm’s core business, contributing over 80% of its total revenue. Moreover, THCOM has expanded its business activities to include internet and telephone services, as well as DTV satellite television dish sales.
THCOM provides telephone services through an investment in a holding company, namely Shenington Investments Pte Company (SHEN). Currently, SHEN has investments in Lao Telecommunications (LTC), in Lao PDR. LTC had 1.487m phone subscribers at the end of 2013 and ranked number one in terms of market share. LTC has significantly improved its 3G mobile system to facilitate rising demand from HSPA subscribers and also introduced 4G service in Vientiane.
THCOM’s earnings have rebounded strongly in the past two years, thanks to strong growth in its satellite services, with contributions from both conventional and broadband satellites. The conventional satellite business has been driven by growing demand in the satellite TV market.
The number of satellite channels under the conventional satellite platform showed a CAGR of 21.4% from 358 channels in 2010 to 641 channels at the end of 2013. In order to serve demand for satellite TV and the increasingly popular high definition TV, THCOM will launch two conventional satellites in 2014. Thaicom 6, which was successfully launched in January 2014, has already booked about 64% of the total capacity, with only capacity for Africa remaining. Thaicom 7 is now under construction and is scheduled to launch in mid-2014. Thaicom 7 is the first license-based satellite awarded by the NBTC. This will not only help reduce regulatory costs (i.e., the license fee is lower than revenue sharing under the concessions), it will also ease concerns about possible business discontinuation after the concession expires in 2021. Thus far, Thaicom 7 has achieved presales of over 40%, with a portion of the clients moving from Thaicom 5. Meanwhile, its broadband satellite, IPSTAR, continues to see bandwidth utilisation rate increases on the back of growing demand for high-speed internet, as well as the development of mobile backhaul solutions.
In 2013, THCOM reached an agreement to sell all the capacity of IPSTAR in China (accounting for 24.4% of IPSTAR’s total capacity) to Vastsuccess Holdings (VAST), a wholly-owned subsidiary of Hong Kong listed Synertone Communication (1613.HK). This pushed IPSTAR’s transponder utilisation rate up to 53% in return for a minimum annual fee and revenue sharing throughout the service period of IPSTAR. In early 2014, Synertone was in negotiations with two potential clients in China to sell bandwidth at 17% of capacity. Should the deal succeed, it will provide an upside to IPSTAR’s spectrum utilisation.
In 2014, IPSTAR will focus on India, Indonesia and the Philippines for growth. After surpassing its breakeven level, we do not expect any sizable discounts to be extended to customers in these markets.
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