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Asia Pacific Equity Research10 November 2010

TIP Telcos: The 3Q10 Deep DiveUpgrading ISAT / TLKM / TEL

Thailand

Indonesia

Philippines

Wireless Services

James R. Sullivan, CFAAC

(65) 6882-2374

[email protected]

Vishesh Gupta(65) 6882 2367

[email protected]

J.P. Morgan Securities Singapore PrivateLimited

Equity Ratings and Price TargetsMkt Cap Price Rating Price Target

Company Symbol ($ mn) Currency Price Cur Prev Cur PrAdvanced Info Services ADVA.BK 9,736 THB 96.75 OW n/c 110.00 100.Total Access Communication DTAC.BK 3,470 THB 43.25 OW n/c 60.00 49.PT Telekomunikasi Indonesia Tb TLKM.JK 19,123 IDR 8,450 OW N 9,800 nPT Indosat Tbk ISAT.JK 3,477 IDR 5,700 OW N 6,600 4,6PT XL Axiata Tbk EXCL.JK 5,635 IDR 5,900 OW n/c 8,000 7,3Philippine Long Distance Telep TEL.PS 10,407 PHP 2,418.00 OW N 2,600.00 2,800.Globe Telecom GLO.PS 2,577 PHP 845.00 N n/c 680.00 780.Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 10 Nov 10.

See page 92 for analyst certification and important disc losures, including non-US analyst d isclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm mhave a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making thinvestment decision.

This is the second edition of our Deep Dive series , a detailed study ofall operating and financial trends in South East Asia post 3Q10 results.

We are upgrading ISAT to OW with a TP of Rp6,600 and estimatedtotal return of 18%. Our 2Q10 Deep Dive report highlighted a potentialturnaround in core operating statistics; all of these trends showedcontinued improvement in 3Q10, driving our upgrade. We are alsoupgrading TLKM and TEL PM to OW (TP of Rp9,800 and Php2,600respectively) after recent underperformance.

Indonesia wireless growing faster then forecast: All three wirelessoperators beat our 3Q10 net addition numbers by 24-46%. This

provides evidence supporting our contention that rising rural wagegrowth will start to positively impact telecom industry revenue growth indeveloping Asia, particularly once penetration hits 100% and lowerincremental ARPU no longer drags down the average. We now have anOW recommendation on all three larger Indonesian telco operators.

Thai voice pricing stable: Pricing stabilized post 3G delay, supportedby both falling CAPEX (encouraging network supply/demand balance)and stable to rising network OpEx per minute (reduces ability to cutpricing without negatively impacting margins). We are OW both AISand DTAC.

#2 operators are becoming more competitive (ISAT/DTAC): Smaller#3 operators around the region outperformed in 2010 due to reasonableoperating improvements as well as significant beta performance in risingmarkets (EXCL, IDEA). Second place operators could take over themantle in 2011 as we are seeing solid signs of operational turnaround.Number two players have also been relative laggards, and could seerotational buying within the sector.

TIP telco price performanceAbsolute Performance (%)

1 mth 3 mth 12 mPT Telkom -10.4% -4.1% -5.8Indosat -0.9% 25.0% 13.9Excelcomindo 9.3% 25.5% 217.2PLDT -11.8% -1.2% -0.6Globe -4.7% -0.7% -11.5AIS 5.4% 4.6% 15.4TAC 4.4% 2.2% 25.7

Average -1.2%

Relative Performance (%)

1 mth 3 mth 12 m

PT Telkom -15.0% -20.9% -39.3Indosat -5.9% 3.1% -26.7Excelcomindo 3.7% 3.5% 104.2PLDT -12.4% -18.4% -32.1Globe -5.3% -18.0% -39.5AIS -3.1% -12.6% -21.4TAC -4.0% -6.1% 15.5

Average -6.0% -

Source: Bloomberg.

Note: Based on closing prices on 09-Nov-2010.

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James R. Sullivan, CFA(65) [email protected]

Table of ContentsInvestment Conclusion ............................................................5

3Q10 Key Takeaways..................................................................................................5It wasnt too early for Indosat..................................................................................6Upgrading TLKM and TEL on recent underperformance .......... ........... ........... ...........7

Investment Summary ...............................................................9

Where weve been 3Q Actuals vs. Forecast..............................................................9Where we are - Operating / Financial trends .......... ........... ........... ........... ........... .......10Where we are - Street View ........... ........... ........... ........... .......... ........... ........... ...........19Where were going - Our revisions............................................................................19

Revenue Build ........................................................................25

EBITDA Build ..........................................................................34

Net profit build........................................................................39

Network Scope / Quality ........................................................41

Thailand operating assumption changes.............................45

Advanced Info Services Detailed Model Revisions..........46

DTAC Detailed Model Revisions ........................................50

Indonesia Operating Assumption Changes .........................54

PT Telkom Detailed Model Revisions ................................57

PT Indosat Detailed Model Revisions................................63PT Excelcom Detailed Model Revisions............................67

Philippines Operating Assumption Changes.......................71

PLDT Detailed Model Revisions.........................................74

Globe Detailed Model Revisions ........................................80

Advanced Info Services-Earnings Strip ...............................85

Total Access Communication Earnings Strip......................86

PT Telekomunikasi Indonesia Tbk -Earnings Strip .............87

PT Indosat Tbk Earnings Strip ..............................................88

PT XL Axiata Tbk Earnings Strip...........................................89

PLDT Earnings Strip...............................................................90

Globe Telecom Earnings Strip ..............................................91

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Figures

Figure 1: TLKM one year forward consensus P/E.......................................................7Figure 2: PLDT one year forward consensus P/E........................................................8Figure 3: Daily Long-short performance of selected factors in Asian Telcos 8Figure 4: TIP Telcos 3Q10 JPMe vs. actual (Rev, EBITDA & EBITDA margin)......9 Figure 5: TIP Telcos 3Q10 JPMe vs. actual (reported EPS)......................................10Figure 6: TIP Telcos wireless monthly net adds (000) .......... ........... ........... ........... ...11Figure 7: TIP Telcos MOU growth-trailing 12 months .......... .......... ........... .......... ....11Figure 8: TIP Telcos wireless voice ARPM growth ........... ........... ........... ........... ......12Figure 9: TIP Telcos wireless data as % of total revenue .......... ........... ........... ..........13Figure 10: TIP Telcos broadband monthly net adds (000).........................................13Figure 11: TIP Telcos broadband ARPU (US$) .......... ........... .......... ........... .......... ....14Figure 12: TIP Telcos revenue growth.......................................................................15

Figure 13: TIP Telcos OpEx/min YoY change..........................................................16Figure 14: TIP Telcos wireless EBITDA margin YoY BP change............................17Figure 15: TIP Telcos EBITDA growth.....................................................................18Figure 16: TIP Telcos % rev to cons 2010E EPS and P/E since initiation (27-Jul)...19Figure 17: TIP Telcos 2010E revisions (Revenue, EBITDA & EBITDA margin)....20Figure 18: TIP Telcos 2011E revisions (Revenue, EBITDA & EBITDA margin)....20Figure 19: TIP Telcos 2010E revisions (reported EPS).............................................21Figure 20: TIP Telcos 2011E revisions (reported EPS).............................................22Figure 21: TIPs Telcos 2010E JPM vs. consensus.....................................................24Figure 22: TIPs Telcos 2011E JPM vs. consensus.....................................................24Figure 23: TIP Telcos wireless monthly net adds (000) .......... ........... ........... ........... .25Figure 24: TIP Telcos wireless monthly churn ........... ........... ........... .......... ........... ....25Figure 25: TIP Telcos wireless monthly gross adds (000).........................................26Figure 26: TIP Telcos wireless MOU ........... ........... ........... .......... ........... ........... .......26Figure 27: TIP Telcos MOU growth..........................................................................27Figure 28: TIP Telcos wireless voice ARPM (US cents/min)-long history...............27Figure 29: TIP Telcos wireless voice ARPM (US cents/min) ........... ........... ........... ..28Figure 30: TIP Telcos wireless voice ARPU (US$) .......... ........... ........... ........... .......29Figure 31: TIP Telcos wireless data ARPU (US$) .......... ........... ........... ........... .........29Figure 32: TIP Telcos wireless data as % of total revenue .......... ........... ........... ........30Figure 33: TIP Telcos wireless total ARPU (US$)....................................................30Figure 34: TIP Telcos fixed line monthly net adds (000) .......... ........... .......... ...........31

Figure 35: TIP Telcos fixed line ARPU (US$)..........................................................31Figure 36: TIP Telcos broadband monthly net adds (000).........................................31Figure 37: TIP Telcos broadband ARPU (US$) .......... ........... .......... ........... .......... ....32Figure 38: TIP Telcos total revenue (US$ mn)..........................................................33Figure 39: TIP Telcos wireless OpEx/min (US cents)...............................................35Figure 40: TIP Telcos wireless OpEx ex. marketing/min (US cents) .......... ........... ...35Figure 41: TIP Telcos wireless EBITDA margin.......................................................36Figure 42: TIP Telcos total EBITDA (US$ mn)........................................................37 Figure 43: TIP Telcos EBITDA margin.....................................................................37Figure 44: TIP Telcos EBITDA margin BP change YoY..........................................38

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Figure 45: TIP Telcos D&A as % of revenue............................................................39 Figure 46: TIP Telcos finance cost as % of revenue..................................................39

Figure 47: TIP Telcos interest income as % of revenue .......... ........... .......... ........... ..39Figure 48: TIP Telcos recurring income (US$ mn) .......... ........... .......... ........... .........40Figure 49: TIP Telcos total wireless BTS..................................................................41Figure 50: TIP Telcos total wireless subs/BTS..........................................................41Figure 51: TIP Telcos outgoing monthly minutes/BTS (000) ........... ........... ........... ..42Figure 52: TIP Telcos wireless capex/incremental sub (US$) ........... ........... ........... ..42Figure 53: TIP Telcos gross PP&E to outgoing MOU (US cents/min) .......... ...........43Figure 54: TIP Telcos gross PP&E to outgoing MOU (USc/min)-2008 onwards .....43Figure 55: TIP Telcos gross PP&E/sub (US$)...........................................................44Figure 56: TIP Telcos fixed line capex/incremental line (US$) ........... ............ .........44

TablesTable 1: TIP Telcos current issues and best/worst placed stocks.................................5Table 2: TIP Telcos 3Q10 Actual vs. JPMe.................................................................9Table 3: TIP Telcos JPM vs. consensus.....................................................................23Table 4: TIP Telcos wireless voice ARPM growth....................................................28Table 5: TIP Telcos wireless voice elasticity.............................................................28Table 6: TIP Telcos total revenue (US$ mn) ........... ........... ........... ........... ........... ......32Table 7: TIP Telcos total revenue growth YoY ........... ........... .......... ........... .......... ....32Table 8: TIP Telcos OpEx/min (US cents) .......... ........... ........... ........... ........... ..........34Table 9: TIP Telcos OpEx/min growth YoY ........... ........... .......... ........... ........... .......34Table 10: TIP Telcos OpEx ex. marketing/min (US cents) ........... ........... ........... ......34Table 11: TIP Telcos OpEx ex. marketing/min growth YoY .......... ........... ........... ....34Table 12: TIP Telcos total EBITDA (US$ mn) ........... ........... .......... ........... ........... ...36Table 13: TIP Telcos total EBITDA growth YoY........... ........... ........... ........... .........36Table 14: TIP Telcos recurring profit (US$ mn)........................................................40Table 15: TIP Telcos recurring income growth YoY .......... ........... ........... ........... .....40Table 16: Thai Telcos country model revisions.........................................................45Table 17: AIS model revisions...................................................................................46Table 18: DTAC model revisions .......... ........... ........... ........... .......... ........... ........... ...50Table 19: Indonesian Telcos wireless country model revisions.................................54Table 20: Indonesian Telcos fixed line country model revisions...............................55Table 21: Indonesian Telcos broadband country model revisions .......... ........... ........56Table 22: Telkomsel model revisions ........... ........... ........... ........... .......... ........... .......57

Table 23: PT Telkom fixed model revisions..............................................................58Table 24: PT Telkom model revisions.......................................................................59Table 25: ISAT model revisions ........... .......... ........... ........... ........... ........... .......... .....63Table 26: Excelcom model revisions.........................................................................67Table 27: Philippines Telcos wireless country model revisions .......... ........... ...........71Table 28: Philippines Telcos fixed line country model revisions ............ ........... .......72Table 29: Philippines Telcos broadband country model revisions.............................73Table 30: PLDT model revisions...............................................................................74Table 31: Globe model revisions .......... ........... ........... .......... ........... .......... ........... .....80

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Investment ConclusionBelow please find a summary of all important operational trends coming out of the

3Q10 results, as we see them.

Table 1: TIP Telcos curr ent issues and best/wor st placed sto cks

Issue Best Worst CommentsRevenue Bui ldWireless net subscriber addition growth ISAT / EXCL TEL / TLKM Indo as a market growing faster then expectedMOU growth ADVANC / TLKM EXCL EXCL bundles change reporting of MOUVoice ARPM growth ADVANC / DTAC / EXCL TLKM / ISAT Thai pricing stabilizedWireless data as a % of revenue growth TLKM / ISAT Thais still far below regional average, potential opportunity

Fixed line net additions GLO TEL / TLKM Globe rebounding off a poor 2Q10Fixed line ARPL GLO Stable across the board

Broadband Net adds TLKM 3G ISAT 3G / TEL Stable DSL net additions across the boardBroadband ARPU TLKM DSL TLKM 3G / TEL ISAT seen as more aggressive, numbers show TLKM more

Overall Revenue growth ISAT / ADVANC / DTAC TEL / Tsel Phils still repricing data in particular

EBITDA Bui ldNetwork OpEx per MOU reductions DTAC / Tsel ADVANC / EXCL DTAC could become more competitiveNetwork OpEx per MOU ex marketing ISAT / DTAC EXCLEBITDA margin bps change YoY DTAC / ISAT / GLO EXCL / TLKM

Overall EBITDA growth DTAC / ISAT EXCL EXCL still fastest absolute but rate of change falling

Overall Net Profit growth ISAT / TEL TLKM

Street ViewStreet 2010 EPS Upgrades EXCL / ADVANC ISAT / GLOOne year forward consensus P/E multiple re-ratings DTAC / TLKM EXCL / GLO EXCL and ISAT most inconsistent in terms of EPS rev / PE changeNetwork scope / qualityTotal BTS TLKMSubscribers per BTS TEL Generally quite stable across the geography

Monthly minutes per BTS EXCLISAT / TLKM /ADVANC EXCL now the lowest in the region

Source: J.P. Morgan estimates.

3Q10 Key Takeaways

Indonesia growing faster than expectedIndonesian wireless net additions in 3Q10 beat our forecasts by 24%/27%/46%

for Telkomsel / Indosat / XL Axiata respectively, with the market on pace to add

2080ppts in wireless penetration this year (vs. 680 in Thailand and 900 in the

Philippines). Indonesia should continue to see the best subscriber growth in the

region despite hitting 100% penetration in 3Q10 as:

Pricing levels in Indonesia already reflect dual SIM and relatively

aggressive bundles;

Thai penetration is structurally held back by the high regulatory fees

paid by operators. These fees serve as a hefty tax on the industry,

which keeps pricing higher than necessary (we note that the Thai

operators are remarkably efficient, with network OpEx per minute on

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par with Indian operators, which theoretically should enable them to

profitably serve large segments of the population at low price points),

which structurally limits penetration rates.

Thai wireless voice pricing stabilizedWe noted in our 2Q10 Deep Dive report that we were starting to see some

evidence of ARPM reductions and pricing pressure in Thailand in advance of the

scheduled 3G auctions. 3Q10 data points show renewed price stability post the

delay of 3G auctions, as well as stable to slightly rising Network OpEx per

minute and falling CAPEX levels. The latter two trends should contribute to

structural price stability over the next 12-18 months given the lack of spare

network capacity (network level supply and demand seem relatively well

balanced) and lack of pricing power (without impacting margins).

#2 operators becoming more competitive (ISAT/DTAC)

Investors generally outperformed in 2010 by holding smaller #3 operatorsaround the region, due to reasonable operating improvements as well as

significant beta performance in rising markets (EXCL, IDEA). 2011 could well

be the year of the second place operator in many of our markets. We are seeing

solid signs of operational turnaround, particularly at ISAT but also within

DTAC. Number two players in many of our markets have also been relative

laggards, and could see rotational buying both within the sector and from

investors looking for turn-around stories that have underperformed.

Wireless broadband beginning to factor in IndonesiaIndosat management has been more aggressive in telling the wireless broadband

story in Indonesia. That said, the numbers clearly show Telkomsel ramping

wireless broadband net additions over the past few quarters. We hold mixed

views on wireless broadband in Indonesia. Positive factors include its ability todrive incremental revenue growth and less SMS cannibalization then in markets

like the Philippines. Negative factors include potential CAPEX risk as voice

network quality is already quite low. Indonesia could begin to serve as a test

case for revenue, margin, and CAPEX impacts of wireless data in Developing

Asia.

It wasnt too early for Indosat

We noted in detail in our 2Q10 Deep Dive report that there were clear signs of

operational improvement for Indosat, but felt that it was too early to buy the stock as

we still saw significant scope for downgrades to street 2010 forecasts.

The stock price (up 25% since the 2Q10 print) has clearly begun to reflect twothings, in our view. First, the data points in the 3Q10 print continued to show that

the operational improvements we noted last quarter have accelerated. Network OpEx

per minute declines have moved from 11% in 1Q10 to 21% in 2Q10, now to 35% in

3Q10. This creates significant scope for upside margin surprise in 2011 on our

analysis. Secondly, the street has now downgraded 2010 expectations by 29% since

the 2Q10 print. The lower downside to 2010 street numbers and the larger upside to

2011 estimates combine to create a more attractive risk / reward.

The key question then becomes one of valuation. Indosat is currently trading at

19.7x 2011 street forecasts, and 15.8x JPM 2011 estimates. The latter puts it in line

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with the rest of the Indonesian telecom stocks, but not at a significant discount. We

feel that Indosat will continue to trade at a multiple premium due to the large

estimate revision potential, as it has done for the past several months. We thereforeupgrade ISAT to an OW with a target price of Rp6,600, and a Total Return

expectation of 18%.

Upgrading TLKM and TEL on recent underperformance

We are also upgrading TLKM and TEL, both of which we downgraded on 13th

October 2010. Our downgrade was predicated on the fact that the stocks were

trading above their normal P/E trading range (although still in line with their

historical relationship with their underlying country index). As such, we felt that

upside was capped they could continue to go up if their home index kept rising (but

would likely underperform); and would likely fall if markets began to stall out given

their high valuation multiples. The stocks' correlation to EPS revisions had also

fundamentally broken down, while correlation to home index risen significantly.

TLKM and TELs valuation multiples have now moved back into their normal

trading ranges. We feel that the recent sell offs have been unwarranted by operating

fundamentals, and now see 20% and 18% total return potential for TLKM and TEL

respectively. We therefore upgrade both to an OW recommendation. Per the Figures

below, they are now trading within normal valuation ranges, and have begun to see

correlation move back to EPS revisions.

Figure 1: TLKM one year forward consensus P/E

Source: Bloomberg.

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Figure 2: PLDT one year forward cons ensus P/E

Source: Bloomberg.

It is interesting to note that valuation has been a primary driver of Asia Telco stock

price performance over the past month (this is supported by the poor share price

performance of the telcos with high P/Es relative to their trading range). The figure

below shows Factor performance over the past month within the sectorMost

momentum factors returned negative performance, while most headline valuation

statistics were positive. This supports, in our view, our approach of targeting

earnings revision stories trading at mid cycle valuation multiples.

Figure 3: Daily Long-short performance of selected factors in Asian Telcos

Source: MSCI, Barra, Thomson Reuters, Bloomberg, J.P. Morgan.

Please note that detailed analysis of all operational and financial drivers is availablelater in this report.

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Investment Summary

This report forms part of an ongoing series of Deep Dive reports, designed to give a

comprehensive quarterly review of all operating and financial trends around South

East Asia. We will use this series to track ongoing structural shifts in the industry, as

well as relative execution within each of the operators in the space.

3Q10 saw our average margin of forecast error for revenue compress to 0.2% from

-2.9%, and EBITA forecast error compress from -1.25% to 0.9%. This is a trend we

obviously hope to continue as we try to further dial in our forecasting models and

attempt to derive more accurate forecasting methodologies.

Where weve been 3Q Actuals vs. Forecast

Table 2: TIP Telcos 3Q10 Actual vs. JPMeRevenue EBITDA EBITDA margin Reported EPS

AIS 3.5% -1.0% -2.1% -2.1%DTAC 4.5% 17.9% 4.4% 21.9%Telkom 0.6% 0.8% 0.1% 7.2%Telkomsel -0.5% -4.6% -2.6% -4.5%ISAT -0.2% -1.6% -0.7% -33.9%Excelcom -2.6% -3.0% -0.3% 0.3%PLDT -4.5% -5.4% -0.6% -7.0%Globe -0.1% -1.6% -0.8% 7.6%

Source: Company reports and J.P. Morgan estimates.

Figure 4: TIP Telcos 3Q10 JPMe vs. actual (Revenue, EBITDA & EBITDA margi n)

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

AIS DTAC Telkom Telkomsel ISAT Excelcom PLDT Globe

Revenue EBITDA EBITDA margin


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Figure 5: TIP Telcos 3Q10 JPMe vs. actual (report ed EPS)

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%


Reported EPS


Where we are - Operating / Financial trends

SubscribersThe largest surprise from the 3Q10 filings was the higher than forecast rate of

wireless subscriber growth in Indonesia. All three operators beat our forecasts (24%

/ 27% / 46% for TLKM / ISAT / EXCL respectively), and both ISAT and EXCL

showed positive rate of change. We believe that this upside growth surprise provides

some early evidence that high levels of rural wage growth across Developing Asia

can drive upside surprise to overall Telecom industry revenue, particularly in markets

where penetration is closing on 100%, as it is in Indonesia. High levels of penetration

help to drive this upside surprise, as incremental ARPUs are likely already at trough

levels (vs. China, for example, where incremental rural ARPUs are still significantly

lower than current averages, holding back overall revenue upside).

The rest of the region saw relatively stable net addition levels save PLDT which

stated that it completed a subscriber base clean up in the quarter.

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Figure 6: TIP Telcos wir eless month ly net adds (000)

-1,000

-500

0

500

1,000

1,500

2,000

2,500

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC Total Thailand Telkomsel ISAT Excelcomindo PLDT Globe


Minutes of UseExcelcom continues to show the largest decline, although similar to 2Q10 we believe

this is largely the result of recategorization of free minutes. Telkomsel and Telkom

Flexi showed good usage momentum in 3Q10.

Figure 7: TIP Telcos MOU growth-trailing 12 months

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

3Q0

9A

4Q0

9A

1Q1

0A

2Q1

0A

3Q1

0A

AIS DTAC Telkomsel ISAT Excelcomindo Telkom-Flexi

Source: Company reports.

Average Revenue Per MinuteThai operators continue to show a stable low percentage point level of price declines.

Telkom and XL Axiata showed similar trends to 2Q10, with positive improvements

in pricing but falling rates of change. Indosat was the only Indonesian operator to

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show negative ARPM growth. We will be closely watching 4Q10 trends to get a

better sense of any impending absolute price declines across Indonesia as a whole.

Figure 8: TIP Telcos wir eless voice ARPM growth

-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

1Q09A 2Q09A 3Q09A 4Q09A 1Q10A 2Q10A 3Q10A


Source: Company data.

Wireless dataThe data clearly shows the impact of several regional strategies:

1) It appears as though the cannibalization of unlimited SMS packages in thePhilippines is beginning to mitigate, with data as a percentage of revenue

stabilizing after falling over the past few quarters;

2) Indosat continues to have a large lead in terms of data as a percentage ofrevenue relative to the other Indonesian operators. We view this as a double

edged sword, as there is cannibalization risk similar to recent quarters in the

Philippines;

3) All three Thai operators continue to have regionally lagging data businesses(as a percentage of revenue). This should represent a significant

opportunity for future revenue growth in Thailand relative to the rest of the

region. We note that the reported numbers for Thailand are like for like

with operators in the rest of the region (i.e. they include SMS).

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Figure 9: TIP Telcos wir eless data as % of total revenue

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC True Telkomsel ISAT Ex celcomindo PLDT Globe


Fixed / BroadbandTelkomsel 3G broadband additions continue to show both absolute as well as rate of

change improvements, while Indosat, despite telling a far more aggressive wireless

data story, lags significantly.

Figure 10: TIP Telcos broadb and month ly net adds (000)

-100

0

100

200

300

400

500

600

700

2007A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

True-xDSL Telkom-3G Indosat-3G Excelcom-3G Telkom-xDSL PLDT-Canopy/Wimax//3G Globe-xDSL


TLKM continues to drive this broadband subscriber growth through significant

ARPU reductions (3Q10 3G Broadband ARPU was USD9.0 vs. USD10.5 a quarter

prior and USD16.2 a year prior).

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Figure 11: TIP Telcos br oadband A RPU (US$)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

1Q11E

2Q11E

3Q11E

4Q11E

2011E

2012E

True-xDSL Telkom-3G Indosat-3G Excelcom-3G Telkom-xDSL PLDT-Canopy/Wimax//3G


Revenue trends by marketThailand: DTAC continues to outgrow ADVANC, as the smaller operator is moreleveraged into a period of pricing stability. Both are showing positive rates of

change which help to underpin our positive view on this market.

Indonesia: The revenue growth gap between XL Axiata and Indosat continues to

narrow, while TLKM continues to lag.

Philippines: Globe continues to show mildly positive top line growth while PLDTremains in negative territory (with a falling rate of change).

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Figure 12: TIP Telcos revenue grow th

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

4Q09A 1Q10A 2Q10A 3Q10A

AIS DTAC PT Telkom Telkomsel ISAT Ex celcomindo PLDT Globe


Network OpEx per minute trendsThe most important statistic here, in our view, is the accelerating reduction in

network OpEx per minute for Indosat. This supports the trend that we noted in our

2Q10 Deep Dive report, and forms the primary reason for our upgrade ofrecommendation. We note that Telkomsel also saw good reductionsagain this is a

trend we will be watching closely as it has clear implications for a potential end to

pricing stability in Indonesia.

AIS and DTAC are now seeing very stable trends in network OpEx per minute,

supporting our case for price stability in Thailand.

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Figure 13: TIP Telcos OpEx/min YoY change

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

4Q09A

1Q10A

2Q10A

3Q10A

AIS DTAC Telkomsel ISAT Excelcomindo

Source: Bloomberg and J.P. Morgan estimates.

EBITDA marginsPT Telkom and Globe are the only operators in the region to see continued margin

decline, with all other operators experiencing margin expansion. DTAC and Indosat

clearly saw the best improvements in rate of change, supporting our argument that

2011 could be the year of the #2 operators in South East Asia telco stocks.

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Figure 14: TIP Telcos wireless EBITDA margin YoY BP chang e

-20%

0%

20%

40%

60%

80%

100%

4Q09A 1Q10A 2Q10A 3Q10A

AIS DTAC PT Telkom Telkomsel ISAT Excelcomindo PLDT Globe


EBITDA growthPT Telkom joins the Philippines in negative YoY EBITDA growth, hopefully it can

return to positive territory faster than PLDT and Globe, both showing negative trends

since 1Q10. DTAC and Indosat again showed the most positive rate of change

trends.

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Figure 15: TIP Telcos EBITDA gro wth

-20%

0%

20%

40%

60%

80%

100%

4Q09A 1Q10A 2Q10A 3Q10A



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Where we are - Street View

Figure 16: TIP Telcos % revision to co nsensus 2010E EPS and P/E since JPM in itiation (27-Jul-2010)

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

AIS DTAC Telkom ISAT Excelcom PLDT Globe

EPS P/E

Source: Bloomberg.

Where were going - Our revisions

Operating / Revenue / EBITDAWe push through relatively minor forecast changes for most of our operators, with

DTAC / ISAT / EXCL seeing the most positive revisions to 2011 estimates.

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Figure 17: TIP Telcos 2010E revisions (Revenue, EBITDA & EBITDA margin)

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%


Revenue EBITDA Margin BP change


Figure 18: TIP Telcos 2011E revisions (Revenue, EBITDA & EBITDA margin)

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%


Revenue EBITDA Margin BP change


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Net profit revisions2011 moves into focus at this stage of the calendar...DTAC / ISAT / EXCL continue

to see positive revisions while the Philippine operators in general see slight negativerevisions..

Figure 19: TIP Telcos 2010E revisions (reported EPS)

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%


EPS


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Figure 20: TIP Telcos 2011E revisions (reported EPS)

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%


EPS


JPM vs. Consensus post revisionsOur largest positive gaps to consensus are now at DTAC / ISAT / EXCL, while we

remain significantly below consensus for Globe..

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Table 3: TIP Telcos JPM vs. con sensus

2010E 2011E

AISRevenue 2.1% 5.3%EBITDA 1.0% 0.2%EBITDA margin-BP diff (0.5) (2.2)EPS -0.5% -1.5%

DTACRevenue 1.4% 5.1%EBITDA 6.9% 10.3%EBITDA margin-BP diff 1.9 1.7EPS 10.5% 22.2%

TelkomRevenue -3.1% -0.4%EBITDA -1.2% -0.1%EBITDA margin-BP diff 1.1 0.2EPS 0.4% 4.9%

IndosatRevenue 1.0% 4.7%EBITDA 2.6% 8.7%EBITDA margin-BP diff 0.8 1.8EPS -9.5% 25.0%

ExcelcomRevenue 2.3% 15.2%EBITDA 3.9% 20.8%EBITDA margin-BP diff 0.8 2.5EPS 4.7% 34.6%

PLDTRevenue -3.2% -1.8%EBITDA -4.2% -1.6%EBITDA margin-BP diff (0.6) 0.1EPS 0.5% 4.0%

GlobeRevenue -1.2% -1.1%EBITDA -7.2% -11.0%EBITDA margin-BP diff (3.3) (5.4)EPS -10.2% -16.5%

Source: Bloomberg, J.P. Morgan estimates.

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Figure 21: TIPs Telcos 2010E JPM vs. cons ensus

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%


Revenue EBITDA Margin BP change EPS


Figure 22: TIPs Telcos 2011E JPM vs. cons ensus

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%


Revenue EBITDA Margin BP change EPS


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Revenue Build

Figure 23: TIP Telcos wireless m onthl y net adds (000)

-1,000

-500

0

500

1,000

1,500

2,000

2,500

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC Total Thailand Telkomsel ISAT Excelcomindo PLDT Globe


Figure 24: TIP Telcos wireless monthly churn

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10E

4Q10E

2010E

1Q11E

2Q11E

3Q11E

4Q11E

2011E

2012E

AIS PLDT Globe


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Figure 25: TIP Telcos wi reless mont hly gro ss adds (000)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

4Q10E

2010E

1Q11E

2Q11E

3Q11E

4Q11E

2011E

2012E

AIS PLDT Globe


Figure 26: TIP Telcos wireless MOU

0

50

100

150

200

250

300

350

400

2005A

2006A

1Q07A

2Q07A

3Q07A

4Q07A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



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Figure 27: TIP Telcos MOU growth

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC Telkomsel ISAT Excelcomindo Telkom-Flexi Bakrie Telecom

TSEL 08: 164%, 2Q09 115%/ EXCL 08: 386%, 1Q09 141%


Figure 28: TIP Telcos wireless v oice ARPM (US cents/min)-long histo ry

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2005A

2006A

2007A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



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Figure 29: TIP Telcos wireless v oice ARPM (US cents/min)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



Table 4: TIP Telcos wireless v oice ARPM growth

2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS -1.3% -22.3% -16.4% -7.9% -0.8% -0.8% -7.5% -3.9% -8.1% -8.4% -5.6% -4.8% -7.6%DTAC 3.3% -9.8% -15.7% -5.7% 2.3% 3.5% -7.9% -3.2% -3.0% -3.9% 0.2% -10.1% -7.1%

IndonesiaTelkomsel -26.8% -69.2% -45.6% -67.5% -18.7% 29.9% -29.9% 56.4% 33.0% 4.4% 14.6% -10.1% -1.9%ISAT -36.4% -50.6% -57.3% -24.4% -16.0% 3.4% -35.0% 21.8% 3.8% -10.1% 12.2% -9.5% 0.7%Excelcomindo -39.8% -79.9% -76.1% -45.1% -24.2% 2.1% -37.9% 47.7% 66.7% 64.1% 51.6% 17.8% -2.3%Telkom-Flexi -22.8% -31.9% -43.8% -36.9% -21.5% 42.5% -20.2% 78.6% 54.1% 42.8% 42.9% -3.2% 1.3%


Table 5: TIP Telcos wireless vo ice elasticit y

2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS -0.2 0.4 -1.4 -11.4 -13.3 0.9 -1.2 0.6 0.8 0.9 0.9 0.7 0.7DTAC -0.9 -1.8 -3.1 5.1 2.0 7.2 -1.1 1.0 0.7 0.5 1.0 0.6 0.7

Indonesia

Telkomsel 0.0 2.4 0.5 1.8 -0.9 2.1 0.5 1.2 1.6 -1.7 -289.6 0.7 0.8ISAT 1.3 0.8 0.5 -1.3 0.6 2.1 0.2 4.6 2.2 1.1 9.2 0.7 0.8Excelcomindo 1.4 4.9 2.0 0.7 0.7 2.3 0.5 0.4 0.9 0.9 0.8 0.6 0.8Telkom-Flexi 1.3 -0.7 -1.0 -0.9 -2.4 1.5 -1.4 0.9 1.2 1.1 1.4 0.2 0.6


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Figure 30: TIP Telcos wir eless voi ce ARPU (US$)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC True Telkomsel ISAT Excelcomindo PLDT Globe


Figure 31: TIP Telcos wi reless data A RPU (US$)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



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Figure 32: TIP Telcos wireless d ata as % of total revenue

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



Figure 33: TIP Telcos wi reless tot al ARPU (US$)

0.0

2.04.0

6.0

8.0

10.0

12.0

14.0

16.0

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC True Telkomsel ISAT Excelcomindo

Telkom-Flex i Indosat-StarOne Bakrie Telecom PLDT Globe Digitel


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Figure 34: TIP Telcos fixed l ine mont hly net adds (000)

-30

-20

-10

0

10

20

30

40

50

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

True PT Telkom PLDT Globe


Figure 35: TIP Telcos fix ed lin e ARPU (US$)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



Figure 36: TIP Telcos broadb and month ly net adds (000)

-100

0

100

200

300

400

500

600

700

2007A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

True-xDSL Telkom-3G Indosat-3G Excelcom-3G Telkom-xDSL PLDT-Canopy/Wimax//3G Globe-xDSL


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Figure 37: TIP Telcos br oadband A RPU (US$)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

1Q11E

2Q11E

3Q11E

4Q11E

2011E

2012E

True-xDSL Telkom-3G Indosat-3G Excelcom-3G Telkom-xDSL PLDT-Canopy/Wimax//3G


Table 6: TIP Telcos total r evenue (US$ mn)

2002A 2003A 2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS 1,866 2,158 2,396 2,298 2,412 3,359 3,357 744 725 735 780 2,983 820 818 874 3,439 3,847 4,247DTAC 744 765 968 1,071 1,279 2,030 2,051 467 461 477 509 1,913 536 539 580 2,265 2,554 2,880

IndonesiaPT Telkom 2,231 3,162 3,798 4,305 5,597 6,503 6,289 1,268 1,517 1,649 1,848 6,219 1,721 1,847 1,901 7,548 8,705 9,918Telkomsel 812 1,300 1,652 2,176 3,180 4,012 3,855 798 964 1,098 1,188 4,003 1,096 1,171 1,247 4,845 5,785 6,802ISAT 716 960 1,167 1,193 1,336 1,804 1,934 394 414 450 527 1,771 512 541 576 2,256 2,688 3,190Excelcom 266 306 351 390 630 874 1,250 250 314 356 417 1,320 444 468 494 1,931 2,606 3,108

PhilippinesPLDT 1,826 2,054 2,167 2,261 2,497 2,995 3,277 772 778 751 811 3,112 794 806 775 3,213 3,488 3,779Globe 888 913 992 1,067 1,170 1,422 1,459 343 336 323 342 1,343 344 358 349 1,412 1,525 1,662


Table 7: TIP Telcos total revenue gr owth YoY

2003A 2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012E

ThailandAIS 11.7% 7.6% -4.1% -1.2% 18.6% 2.2% -8.2% -11.1% -9.3% -1.1% -7.5% 2.5% 5.3% 10.7% 6.9% 5.9% 8.4%DTAC -0.7% 22.5% 10.7% 12.4% 35.2% 3.3% -6.8% -5.1% -3.1% 3.4% -3.0% 6.7% 8.9% 13.2% 9.8% 6.8% 10.7%

IndonesiaPT Telkom 30.3% 25.2% 23.2% 22.7% 15.9% 2.1% -2.2% 5.2% 13.9% 9.0% 6.4% 8.3% 5.4% 4.0% 5.8% 10.5% 11.6%Telkomsel 47.2% 32.5% 43.1% 37.9% 25.8% 1.4% -3.6% 12.2% 24.8% 14.9% 11.8% 9.6% 5.0% 2.6% 5.5% 14.4% 15.2%ISAT 23.3% 26.7% 11.1% 5.6% 34.7% 13.2% 6.8% -6.2% -7.9% 2.4% -1.4% 3.8% 13.0% 15.4% 11.1% 14.1% 16.2%Excelcom 5.7% 19.4% 21.0% 52.4% 38.3% 51.0% 10.6% 4.6% 6.9% 33.6% 13.6% 41.5% 28.8% 25.2% 27.6% 29.3% 16.8%

PhilippinesPLDT 18.1% 9.1% 2.4% 2.8% 7.8% 5.5% 4.0% 2.6% 0.6% -0.5% 1.7% -0.8% -1.2% -2.9% -1.8% 4.2% 6.5%Globe 8.0% 12.4% 5.6% 2.0% 9.3% -1.1% 3.0% -0.3% -3.2% -5.2% -1.5% -3.0% 1.6% 1.7% 0.1% 3.7% 7.2%


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Figure 38: TIP Telcos total revenu e (US$ mn)

0

2,000

4,000

6,000

8,000

10,000

12,000

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

2010E

2011E

2012E



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EBITDA Build

Table 8: TIP Telcos OpEx/min (US cents)

2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS NA NA 2.25 2.35 1.63 1.44 1.45 1.29 1.32 1.39 1.26 1.16 1.27 1.30 1.30 1.31DTAC NA NA 2.03 2.73 2.52 2.36 2.42 2.42 2.18 2.39 2.19 2.26 2.45 2.32 2.15 2.12

IndonesiaTelkomsel 7.63 5.61 5.04 4.80 1.51 0.87 0.88 1.10 1.45 1.05 1.45 1.46 1.42 1.41 1.34 1.31ISAT NA NA 5.51 4.40 2.52 2.00 2.11 2.54 2.49 2.05 2.26 1.97 1.87 1.94 1.66 1.58Excelcom NA 12.59 12.13 7.21 1.31 0.78 0.83 0.84 0.87 0.82 0.91 1.20 1.30 1.16 1.28 1.27Bakrie NA NA 1.62 1.56 1.14 0.89 0.60 0.77 0.84 0.77 0.68 NA NA NA NA NA


Table 9: TIP Telcos OpEx/min grow th YoY

2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS NA NA NA 4.4% -30.4% -21.6% -13.9% -26.1% -23.3% -15.2% -12.8% -20.1% -1.2% -6.4% 0.4% 0.3%DTAC NA NA NA 34.7% -7.9% -14.6% -6.3% -4.8% -12.7% -5.1% -7.2% -6.6% 1.4% -2.7% -7.2% -1.4%

IndonesiaTelkomsel NA -26.4% -10.2% -4.7% -68.6% -40.4% -72.4% -22.8% 44.0% -30.2% 66.3% 65.1% 28.8% 33.8% -5.1% -2.0%ISAT NA NA NA -20.2% -42.7% -41.2% -7.8% 4.4% 18.6% -18.7% 13.4% -6.4% -26.4% -5.4% -14.6% -4.8%Excelcom NA NA -3.7% -40.6% -81.9% -73.5% -37.0% -20.5% -17.3% -37.0% 17.6% 44.1% 54.5% 41.0% 9.7% -0.2%Bakrie NA NA NA -3.6% -26.7% -36.9% -49.5% -32.3% -11.7% -32.5% -23.4% NA NA NA NA NA


Table 10: TIP Telcos OpEx ex. marketing/mi n (US cents)

2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS NA NA 2.09 2.18 1.53 1.37 1.36 1.21 1.21 1.30 1.22 1.09 1.21 1.23 1.22 1.21DTAC NA NA 1.82 2.53 2.33 2.19 2.26 2.27 2.03 2.23 2.04 2.13 2.31 2.18 2.03 2.00

IndonesiaTelkomsel 6.97 5.14 4.62 4.40 1.37 0.82 0.81 1.00 1.31 0.96 1.36 1.35 1.30 1.29 1.22 1.19ISAT NA NA 5.01 4.01 2.27 1.84 1.92 2.30 2.29 1.88 2.05 1.76 1.65 1.73 1.48 1.41Excelcom NA 10.40 9.67 5.77 1.05 0.67 0.72 0.72 0.75 0.71 0.79 1.02 1.10 0.99 1.07 1.05Bakrie NA NA 1.11 1.12 0.79 0.70 0.36 0.52 0.57 0.53 0.47 NA NA NA NA NA


Table 11: TIP Telcos OpEx ex. marketing/mi n grow th YoY

2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012E

ThailandAIS NA NA NA 4.3% -30.1% -21.1% -15.3% -25.9% -21.3% -14.8% -11.1% -19.9% -0.1% -5.6% -0.8% -0.7%DTAC NA NA NA 39.2% -8.2% -15.0% -4.8% -3.3% -11.5% -4.2% -6.7% -5.9% 2.1% -2.1% -7.1% -1.3%

IndonesiaTelkomsel NA -26.3% -10.1% -4.6% -68.9% -39.5% -72.3% -21.4% 43.3% -29.7% 66.0% 66.2% 29.8% 34.0% -5.5% -2.6%ISAT NA NA NA -20.0% -43.3% -40.2% -6.5% 6.2% 19.6% -17.5% 11.5% -8.4% -28.4% -7.7% -14.4% -4.7%Excelcom NA NA -7.0% -40.4% -81.8% -71.4% -31.2% -14.3% -13.7% -32.2% 17.5% 41.6% 52.4% 38.8% 8.6% -2.1%Bakrie NA NA NA 0.8% -29.4% -25.8% -58.5% -34.8% -12.1% -32.7% -32.5% NA NA NA NA NA


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Figure 39: TIP Telcos wireless OpEx/min (US cents)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2006A

2007A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC Telkomsel ISAT Excelcomindo Bakrie Telecom


Figure 40: TIP Telcos wireless OpEx ex. marketin g/min (US cents)

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2006A

2007A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



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Figure 41: TIP Telcos wireless EBITDA margin

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%65.0%

70.0%

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC Telkomsel ISAT Ex celcomindo PLDT Globe


Table 12: TIP Telcos t otal EBITDA (US$ mn)

2002A 2003A 2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS 778 1,054 1,261 1,194 1,114 1,353 1,411 330 325 337 346 1,336 394 390 400 1,591 1,696 1,760DTAC 244 295 375 410 470 585 702 136 137 149 167 589 184 186 221 812 892 982

IndonesiaPT Telkom 1,352 1,954 2,352 2,619 3,349 3,929 3,459 712 890 956 847 3,386 977 1,070 1,051 4,171 4,726 5,502Telkomsel 548 936 1,194 1,586 2,263 2,801 2,494 509 656 737 759 2,631 692 724 760 2,995 3,495 4,187ISAT 383 511 673 693 770 953 963 183 211 202 256 845 241 261 280 1,105 1,345 1,630Excelcom 154 169 182 179 279 384 532 96 138 168 208 597 231 251 263 1,024 1,417 1,675

Philippines

PLDT 534 919 1,230 1,398 1,515 1,788 1,908 456 464 412 423 1,760 458 481 450 1,852 2,023 2,175Globe 518 514 587 607 726 873 842 205 196 176 190 767 188 183 173 723 744 813


Table 13: TIP Telcos total EBITDA gro wth YoY

2003A 2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS 30.7% 16.0% -5.3% -12.2% 3.5% 6.6% -5.1% -6.3% -0.5% 8.3% -1.4% 11.2% 12.0% 10.6% 10.4% 0.9% 1.9%DTAC 16.5% 23.1% 9.6% 7.8% 6.0% 22.5% -15.6% -39.6% -1.3% 24.4% -12.7% 26.0% 26.6% 38.2% 27.9% 4.0% 8.1%

IndonesiaPT Telkom 32.9% 25.5% 21.0% 20.6% 17.0% -7.1% -8.7% 9.3% 25.4% -1.8% 5.4% 9.5% 4.0% -0.8% 7.4% 8.6% 14.0%Telkomsel 57.1% 33.0% 44.4% 34.6% 23.5% -6.0% -13.2% 21.5% 39.8% 13.4% 13.6% 8.6% -4.5% -6.9% -0.7% 11.8% 17.3%ISAT 22.9% 37.2% 11.9% 4.8% 23.6% 6.6% -4.0% -3.2% -14.6% -0.3% -5.5% 5.2% 7.3% 24.9% 14.1% 16.6% 18.7%Excelcom 0.6% 12.2% 6.8% 47.2% 37.4% 46.2% -1.8% -1.2% 11.1% 92.8% 20.9% 92.2% 57.4% 41.3% 49.5% 32.6% 15.7%

PhilippinesPLDT 81.0% 38.4% 11.6% 0.9% 6.1% 2.9% 0.7% 1.4% -8.7% 2.2% -1.2% -3.1% -1.1% 2.6% 0.1% 4.9% 5.7%Globe 4.3% 18.1% 1.6% 11.3% 8.1% -7.0% -1.5% -0.4% -8.3% 0.1% -2.5% -11.3% -10.9% -7.8% -10.2% -1.2% 7.4%


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Figure 42: TIP Telcos tot al EBITDA (US$ mn)

0

1,000

2,000

3,000

4,000

5,000

6,000

200

1A

200

2A

200

3A

200

4A

200

5A

200

6A

200

7A

200

8A

200

9A

201

0E

201

1E

201

2E



Figure 43: TIP Telcos EBITDA margin

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E



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Figure 44: TIP Telcos EBITDA margi n BP chang e YoY

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2004A

2005A

2006A

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS DTAC PT Telkom Telkomsel ISAT Ex celcomindo PLDT Globe


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Net profit build

Figure 45: TIP Telcos D&A as % of r evenue

14.0%

19.0%

24.0%

29.0%

34.0%

39.0%

4Q09A 1Q10A 2Q10A 3Q10A



Figure 46: TIP Telcos financ e cost as % of revenue

0.0%

2.0%4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

4Q09A 1Q10A 2Q10A 3Q10A



Figure 47: TIP Telcos interest in come as % of revenue

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

4Q09A 1Q10A 2Q10A 3Q10A



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Table 14: TIP Telcos recur ring p rofit (US$ mn)

2002A 2003A 2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012E

ThailandAIS 272 445 502 464 428 506 570 129 120 123 135 506 161 158 163 649 686 677DTAC 49 60 110 116 129 181 229 42 39 48 64 193 75 75 76 324 367 392

IndonesiaPT Telkom 817 700 832 859 1,139 1,429 1,221 225 288 310 200 1,024 287 359 324 1,301 1,587 2,009Telkomsel 299 500 617 897 1,211 1,495 1,219 228 320 363 348 1,244 302 340 359 1,394 1,713 2,193ISAT 32 161 201 176 164 230 258 23 27 10 -3 68 10 8 19 91 226 377Excelcom NA NA NA -23 37 79 36 9 10 26 95 131 62 83 87 324 556 753

PhilippinesPLDT -317 25 565 571 684 753 814 218 225 190 206 838 228 231 223 903 997 1,112Globe 169 205 207 159 212 279 265 85 68 52 56 261 61 53 44 205 196 243


Table 15: TIP Telcos recurring income growth YoY

2004A 2005A 2006A 2007A 2008A 1Q09A 2Q09A 3Q09A 4Q09A 2009A 1Q10A 2Q10A 3Q10A 2010E 2011E 2012EThailandAIS 9.2% -7.5% -13.2% 0.6% 15.2% -12.8% -33.9% -8.1% 63.2% -7.5% 16.1% 23.0% 23.3% 18.9% 0.0% -3.1%DTAC 78.7% 5.1% 4.8% 19.6% 29.0% -37.3% -36.3% -10.9% 75.0% -12.3% 66.3% 78.2% 48.0% 55.8% 7.4% 4.7%

IndonesiaPT Telkom 23.8% 12.2% 25.1% 25.1% -9.8% -19.5% 0.1% 12.4% -32.8% -9.7% 1.9% 7.6% -5.8% 10.8% 16.9% 23.9%Telkomsel 28.7% 57.9% 27.4% 23.1% -13.9% -26.8% 23.5% 34.1% 21.3% 9.8% 5.8% -8.1% -10.7% -2.2% 17.7% 25.4%ISAT 30.3% -4.8% -12.0% 39.7% 18.5% -43.3% -48.5% -84.8% -103.2% -71.7% -64.3% -74.4% 69.9% 16.8% 138.0% 63.3%Excelcom NA NA NA 115.4% -51.9% -38.5% -65.7% -9.7% -320.8% 292.4% 454.5% 639.5% 202.4% 114.9% 64.7% 32.6%

PhilippinesPLDT 2218.4% -0.9% 11.5% -1.0% 4.2% 9.7% 13.2% -0.2% 20.9% 10.2% 1.0% -2.3% 10.3% 2.6% 6.0% 9.7%Globe 4.3% -24.7% 24.2% 18.6% -8.6% 15.9% 2.4% -8.4% 10.2% 5.5% -31.3% -25.4% -21.1% -25.3% -8.1% 21.8%


Figure 48: TIP Telcos recurri ng in come (US$ mn)

0

500

1,000

1,500

2,000

2,500

2004A

2005A

2006A

2007A

2008A

2009A

2010E

2011E

2012E



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Network Scope / Quality

Figure 49: TIP Telcos total wi reless BTS

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2001A

2002A

2003A

2004A

2005A

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS Telkomsel ISAT Excelcomindo PLDT


Figure 50: TIP Telcos total wi reless subs /BTS

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS Telkomsel ISAT Excelcomindo PLDT


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Figure 51: TIP Telcos ou tgoing month ly minu tes/BTS (000)

0

100

200

300

400

500

600

700

800

2006A

2007A

1Q08A

2Q08A

3Q08A

4Q08A

2008A

1Q09A

2Q09A

3Q09A

4Q09A

2009A

1Q10A

2Q10A

3Q10A

2010E

2011E

2012E

AIS Telkomsel ISAT Excelcomindo Source: Company reports and J.P. Morgan estimates.

Figure 52: TIP Telcos wireless c apex/incremental su b (US$)

0

50

100

150

200

250

300

350

400

450

2002A

2003A

2004A

2005A

2006A

2007A

2008A

2009A

2010E

2011E

2012E

AIS DTAC True Telkomsel ISAT Excelcomindo Bakrie Telecom PLDT Globe Digitel


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Figure 53: TIP Telcos gros s PP&E to outgo ing MOU (US cents/min)

4.0

14.0

24.0

34.0

44.0

54.0

64.0

74.0

84.0

2

002A

2

003A

2

004A

2

005A

2

006A

2

007A

2

008A

2

009A

2

010E

2

011E

2

012E



Figure 54: TIP Telcos gross PP&E to outgo ing MOU (USc/min)-2008 onwards

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2008A

2009A

2010E

2011E

2012E



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Figure 55: TIP Telcos gr oss PP&E/sub (US$)

0

200

400

600

800

1,000

1,200

20

02A

20

03A

20

04A

20

05A

20

06A

20

07A

20

08A

20

09A

20

10E

20

11E

20

12E

AIS DTAC True Telkomsel ISAT Excelcomindo

Bakrie Telecom PT Telkom PLDT Globe Digitel


Figure 56: TIP Telcos fixed li ne capex/incremental l ine (US$)

0

50

100

150

200

250

300

350

2003A

2004A

2005A

2006A

2007A

2008A

2009A

2010E

2011E

2012E



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Thailand operating assumption changes

Table 16: Thai Telcos country model revisions

2010E 2011E 2012EWireless subs (000) New 30,982 33,202 35,602

AIS Old 30,908 33,083 35,483% change 0.2% 0.4% 0.3%Abs change 74 119 119

DTAC New 21,295 23,215 25,315Old 21,360 23,235 25,335% change -0.3% -0.1% -0.1%Abs change (65) (20) (20)

Voice ARPM (Bt) New 0.61 0.55 0.50AIS Old 0.61 0.55 0.50

% change -0.3% 0.1% 0.0%

Abs change (0.0) 0.0 0.0

DTAC New 0.64 0.55 0.50Old 0.64 0.55 0.50% change 1.1% 0.1% 0.0%Abs change 0.0 0.0 0.0

Voice MOU (Bt) New 302.2 322.0 342.9AIS Old 301.6 321.8 342.6

% change 0.2% 0.1% 0.1%Abs change 0.6 0.2 0.3

DTAC New 267.4 292.9 311.0Old 272.9 301.7 322.9% change -2.0% -2.9% -3.7%Abs change (5.5) (8.9) (11.9)

Voice ARPU (Bt) New 184.7 177.5 171.5AIS Old 184.8 177.3 171.3

% change -0.1% 0.1% 0.1%Abs change (0.2) 0.2 0.2

DTAC New 172.2 160.6 155.5Old 173.8 165.3 161.4% change -0.9% -2.9% -3.7%Abs change (1.6) (4.7) (6.0)

Data ARPU (Bt) New 41.9 48.3 58.0AIS Old 42.8 49.6 59.0

% change -2.1% -2.6% -1.6%Abs change (0.9) (1.3) (1.0)

DTAC New 30.2 32.9 42.2Old 30.5 35.6 44.4

% change -0.9% -7.4% -4.9%Abs change (0.3) (2.6) (2.2)

Total ARPU (Bt) New 305.4 301.2 304.4AIS Old 301.9 297.0 299.3


DTAC New 293.4 288.3 292.7Old 287.6 277.9 280.8% change 2.0% 3.8% 4.2%Abs change 5.9 10.4 11.9


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Advanced Info Services Detailed Model

RevisionsTable 17: AIS model revisi ons

(Bt mn, YE Dec) 2010E 2011E 2012E

RevenueNew 109,487 115,978 125,684Old 108,096 114,013 123,113% change 1.3% 1.7% 2.1%Abs change 1,391 1,966 2,571

EBITDANew 50,653 51,129 52,086Old 51,157 52,078 53,019% change -1.0% -1.8% -1.8%Abs change (504) (949) (933)

EBITDA marginNew 46.3% 44.1% 41.4%Old 47.3% 45.7% 43.1%PPS change -1.1% -1.6% -1.6%

EBITNew 31,309 30,825 30,142Old 31,435 31,892 31,305% change -0.4% -3.3% -3.7%Abs change (127) (1,067) (1,164)

Net incomeNew 19,679 20,320 20,036Old 19,923 21,040 20,869% change -1.2% -3.4% -4.0%Abs change (244) (719) (833)

Recurring incomeNew 20,675 20,670 20,036Old 20,871 21,390 20,869% change -0.9% -3.4% -4.0%Abs change (196) (719) (833)

Reported EPS (Bt)New 6.64 6.85 6.76Old 6.71 7.08 7.04% change -1.1% -3.3% -4.0%Abs change (0.07) (0.23) (0.28)

DPS (Bt)New 12.30 6.80 6.70Old 11.30 6.30 6.30



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Company Description P&L sensitivity metrics EBITDA EPS

2010E impact (%) impact (%)

Blended Wireless ARPU (Bt) 243Impact of each 5% 4.0% 6.7%

Wireless subs (mn) 31.0

Impact of each 5% 2.1% 3.5%

EBITDA margin (%) 46.3%


Capex (Bt mn) 6,184

Impact of each 5% NM 0.0%

Source: J.P. Morgan estimates

AIS is the largest mobile operator inThailand with 46% of the mobile marketwhere more than 95% the populationowns a mobile phone. The company isconsidering an investment in 3G eitherthrough new frequency allocation orutilizing its currently available frequency.

Price target methodology

Revenue distribution (2010E) Our PT is based on a sum of 1) potential upside/ (downside) toconsensus EPS vs. JPM EPS estimates and 2) our estimated multiple

expansion/(contraction) based on peak P/E multiple. Our peak P/Emultiple is based on the stocks historical trading range and expectedfuture business changes.

Price target and valuation analysis 2010E 2011E

Current consensus P/E (a) 10.1 14.6

Peak P/E (b) 15.0 15.0

Upside/ (Downside) to peak multiple (b/a-1=e) 48.0% 2.9%

JPM vs. consensus EPS (d) -0.5% -1.5%


Cumulative upside to current price (e+d) 47.5% 1.4%J.P. Morgan vs consensus JPM Dec-2011 price target (Bt/sh) 110

Bt mn J. P. Morgan Consensus

FY10E-Rev 109,487 107,190

FY11E-Rev 115,978 110,192FY10E-EBITDA 50,653 50,144FY11E-EBITDA 51,129 51,012FY10E-Netinc. 19,679 19,819FY11E-Netinc. 20,320 20,644

Source: J.P. Morgan estimates, Bloomberg

If our price target were achieved, AIS would be trading at a 2010E/11Eadjusted PER and EV/EBITDA of 15.8x/15.8x and 6.7x/6.9x. At itstarget price, AIS would be providing a FY10E/FY11E dividend yield of11.2%/6.2% with a Bt6 special in 2010. A well-funded new entranttaking one of the three 3G licenses on offer is the key risk to our targetprice.

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All Data As Of 09-Nov-10

Quant Return Drivers (a Score >50% indicates company ranks 'above average') J.P. Morgan Composite Q-ScoreScore 0% (worst) to 100% (best) vs Industry Raw Value

Value

P/E Vs Market (12mth fwd EPS) 55% 1.1x

P/E Vs Sector (12mth fwd EPS) 55% 1.1x

EPS Growth (forecast) 42% 9.3%

Value Score 48%

Price Momentum

12 Month Price Momentum 70% 29.4%

1 Month Price Reversion 27% 5.2%

Momentum Score 65%

Quality

Return On Equity (forecast) 85% 30.5%

Earnings Risk (Variation in Consensus) 75% 0.05 Quant Return Drivers Summary (vs Country)

Quality Score 86%

Earnings & Sentiment

Earnings Momentum 3mth (risk adjusted) 89% 114.3

1 Mth Change in Avg Recom. 3% -0.44

Net Revisions FY2 EPS 99% 100%

Earnings & Sentiment Score 62%

COMPOSITE Q-SCORE* (0% To 100%) 67%

Targets & Recommendations** EPS Revisions** Historical Total Return (%)

Consensus Growth Outlook (%)

Closest in Country by Size (Consensus. ADV = average daily value traded in US$m over the last 3 mths)

Code Industry ADV PE FY1 Q-Score*PTTEP-TH 38.16 16.5 45%

SCC-TH 27.38 15.7 67%

SCB-TH 35.72 16.0 34%

KBANK-TH 24.69 15.9 62%

BBL-TH 26.74 12.2 47%

ADVANC-TH 25.54 14.7 53%PTTCH-TH 30.26 23.9 79%BANPU-TH 44.04 15.9 68%

KTB-TH 33.29 13.7 89%CPALL-TH 11.98 28.9 88%IVL-TH 20.53 27.5 45%

Source: Factset, Thomson and J.P. Morgan Quantitative Research. For an explanation of the Q-Snapshot, please visit http://jpmorgan.hk.acrobat.com/qsnapshot/Q-Snapshots are a product of J.P. Morgans Global Quantitative Analysis team and provide quantitative metrics summarized in an overall company 'Q-Score.'Q-Snapshots are based on consensus data and should not be considered as having a direct relationship with the J.P. Morgan analysts recommendation.* The Composite Q-Score is calculated by weighting and combining the 10 Quant return drivers shown. The higher the Q-Score the higher the one monthexpected return. On a 14 Year back-test the stocks with the highest Q-Scores have been shown (on average) to significantly outperform those stocks with the

lowest Q-Scores in this universe. ** The number of up, down and unchanged target prices, recommendations or EPS forecasts that make up consensus.

10,236

20,943

14,144

Regional Banks

Q-Snapshot: Advanced Info Service PCL

EPS Momentum (%)

I N D U S T R Y

94%

93%

86%

13,024

84%

82%

Oil & Gas Production

Construction Materials

Regional Banks

USD MCAP

Krung Thai Bank PCL

CP ALL PCL

PTT Exploration & Production PCL

53%

Advanced Info Service PCL

Indorama Ventures PCL

10,124

8,227

6,701

7,376

6,469

5,838

Coal

Chemicals: Specialty

9,700

Chemicals: Specialty

63%

Siam Cement PCL

Siam Commercial Bank PCL

PTT Chemical PCL

Banpu PCL

Kasikornbank PCL

Food Retail

vs Country

37%

44%

26%

27%

49%

25%

33%

Major Banks

Regional Banks

Wireless Telecommunications

7%

Name

Bangkok Bank PCL

59

29

45

0

10

20

30

40

50

1Mth 3Mth 1Yr 3Yr

(LocalCurrency%)

0

5

10

15

20

Up Dn UnchangedConsensusChanges(4wks) Targets Recoms

0

5

10

15

20

Up Dn Unchanged

ConsensusChanges(4wks)

FY1 FY2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

-1 Mth -3 Mth

(%)

FY1 FY2

HIGH/STRONGER

0%

25%

50%

75%

100%

0% 25% 50% 75% 100%

LOW/WEAKER

C

O

U

N

T

R

Y

14.2

4.4 4.6

-0.2

-8.4

3.2

-10.0

-5.0

0.0

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JPM Q-ProfileAdvanced Info Service PCL (THAILAND / Telecommunication Services)As Of: 04-Nov-2010 [email protected]

Local Share Price Current: 92.00 12 Mth Forward EPS Current: 6.75

Earnings Yield (& local bond Yield) Current: 7% Implied Value Of Growth* Current: 10.61%

PE (1Yr Forward) Current: 13.6x Price/Book Value Current: 4.8x

ROE (Trailing) Current: 28.03 Dividend Yield (Trailing) Current: 6.71

Summary

Advanced Info Service PCL 9175.17 As Of:

THAILAND 23.51337 SEDOL 6412568 Local Price: 92.00

Telecommunication Services Wireless Telecommunication Ser EPS: 6.75

Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg

12mth Forward PE 13.63x 7.34 31.32 13.84 15.67 26.51 4.83 -46% 130% 2% 15%

P/BV (Trailing) 4.79x 1.87 13.89 3.83 4.48 8.87 0.09 -61% 190% -20% -7%

Dividend Yield (Trailing) 6.71 0.00 9.40 3.33 3.71 9.51 -2.08 -100% 40% -50% -45%

ROE (Trailing) 28.03 10.55 37.24 23.08 24.02 38.64 9.40 -62% 33% -18% -14%

Implied Value of Growth 10.6% -0.39 0.71 0.27 0.28 0.79 -0.22 -467% 572% 156% 169%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

4-Nov-10

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12Mth fwd EY Thailand BY Proxy

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DTAC Detailed Model Revisions

Table 18: DTAC model revision s

(Bt mn, YE Dec) 2010E 2011E 2012ERevenueNew 72,093 77,004 85,227Old 70,767 74,359 81,832% change 1.9% 3.6% 4.1%Abs change 1,326 2,644 3,395

EBITDANew 25,853 26,885 29,067Old 24,051 23,073 23,399% change 7.5% 16.5% 24.2%Abs change 1,802 3,812 5,668

EBITDA margin

New 35.9% 34.9% 34.1%Old 34.0% 31.0% 28.6%PPS change 1.9% 3.9% 5.5%

EBITNew 15,009 16,022 16,723Old 13,806 11,749 10,653% change 8.7% 36.4% 57.0%Abs change 1,203 4,273 6,070

Net incomeNew 10,949 11,077 11,596Old 9,968 8,184 7,434% change 9.8% 35.4% 56.0%Abs change 980 2,894 4,163

Recurring income

New 10,314 11,077 11,596Old 9,975 8,184 7,434% change 3.4% 35.4% 56.0%Abs change 339 2,894 4,163

Reported EPS (Bt)New 4.62 4.68 4.90Old 4.22 3.47 3.15% change 9.5% 35.0% 55.5%Abs change 0.40 1.21 1.75

DPS (Bt)New 2.87 2.34 2.45Old 2.11 1.73 1.57% change 36.0% 35.0% 55.5%Abs change 0.76 0.61 0.87


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Company Description P&L sensitivity metrics EBITDA EPS2010E impact (%) impact (%)

Blended Wireless ARPU (Bt/mo) 211


Wireless subs (mn) 21.3


EBITDA margin (%) 35.9%


Capex (Bt mn) 4,957

Impact of each 5% NA 0.1%


DTAC is the second largest GSM mobilephone provider in Thailand after AIS. Itwas founded in 1989 to provide wirelesstelecommunication service in 800 MHzand 1800 MHz frequency bands under a27-year "Build-Transfer-Operate"concession granted by CAT Telecom.

Price target methodology

Revenue customer chart

Our PT is based on a sum of 1) potential upside/ (downside) toconsensus EPS vs. JPM EPS estimates and 2) our estimated multipleexpansion/(contraction) based on peak P/E multiple. Our peak P/Emultiple is based on the stocks historical trading range and expectedfuture business changes.

Price target and valuation analysis 2010E 2011E

Current consensus P/E (a) 10.22 11.16

Peak P/E (b) 14.00 14.00

Upside/ (Downside) to peak multiple (b/a-1=e) 37.1% 25.4%

JPM vs. consensus EPS (d) 10.5% 22.2%Source: J.P. Morgan estimates

Cumulative upside to current price (e+d) 47.5% 47.6%

J.P. Morgan vs consensus JPM Dec 2011 price target (Bt/sh) 60

Bt mn J. P. Morgan Consensus

FY10E-Rev 72,093 71,120

FY11E-Rev 77,004 73,280FY10E-EBITDA 25,853 24,176FY11E-EBITDA 26,885 24,373FY10E-Netinc. 10,949 9,837FY11E-Netinc. 11,077 9,108

Source: J.P. Morgan estimates, Bloomberg

If our price target were achieved, DTAC would be trading at a2010E/11E adjusted PER and EV/EBITDA of 13.8x/12.8x and5.5x/5.3x. It would be providing a dividend yield of 4.8%/3.9%assuming the 50% historical payout of core profits is continued. A wellfunded new entrant taking one of the three 3G licenses on offer is thekey risk to our target price.

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