Gulf Energy’s telecom moves questioned by investors

Analysts and investors are questioning Thailand’s largest electricity-generating firm Gulf Energy Plc (GULF)’s announcement on Friday that they recently purchased over 147 million shares of a telecom operator.

GULF made headlines over the past few days after it announced it has become the fourth-largest shareholder of Intouch Holdings Plc (INTUCH).

The firm had been buying up shares in the open market over the past couple of months.

The 400 billion baht market capitalized firm is now among the largest shareholders of INTUCH according to data available on the Stock Exchange of Thailand.

The shareholders’ list indicates that GULF owns 147,044,400 shares of the 183 billion market capitalized INTUCH which is the holding company for the likes of Advanced Info Services Plc (ADVANC), ThaiCom Plc and CS Loxinfo Plc.

The purchase of INTUCH is estimated to cost GULF close to 7-8 billion baht, according to Kasikorn Research.

Kasikorn also feels that half of this fund came from internal cash flow while the remaining came from short-term borrowings.

The move to acquire a business that is totally unrelated to the energy company has baffled many analysts and investors who privately question GULF’s motives.

GULF’s executive director and chief financial officer, Yupapin Wangviwat has publically defended GULF’s move to invest in INTUCH. He said that that the investment was related to a higher dividend yield which GULF would be able to derive from INTUCH.

Yupapin added that the cost of funds to finance the purchase was around 2 per cent while the dividend yield was more than 4-5 per cent which justified the investment.

Media reports have said that the dividend from this investment alone could range from 300-400 million baht each year over the next three years.

Dividend Yield

Having a good dividend payment has been the trademark of INTUCH ever since the firm was sold by the family of former prime minister Thaksin Shinawatra to Singapore’s SingTel and Temasek Holdings in 2006. 

The sale that sparked the street protests against Thaksin which prompted Shin Corp (former name of INTUCH) to dish out dividends to investors. 

The dividend yield of INTUCH over the past few years has been impressive with yields in excess of 4 per cent over the past four years.

Year20162017201820192020 (Q1)
Dividend Yield9.31%8.18%8.65%4.73%4.65%

However, the past performance of any company is no indication of what their performance would be in the future.

COVID-19 Impact 

The impact of the coronavirus has not been taken into account and industry experts say that any assessment of the business should be taken with a pinch of salt.

“If they think that it is business as usual then they should rethink their strategy,” said a senior official at one of the country’s three mobile phone operators who wished to remain anonymous.

“We, at the board level, have been under immense pressure to see how things are going to be post-COVID because we have seen a sharp decline in the revenue stream,” the source said.

INTUCH derives a bulk of its revenues from ADVANC, which is the country’s leading mobile phone operator with more than 41 million customers. According to available data, approximately 80-85 per cent of all the subscribers for all three mobile phone operators are in the prepaid segment.

The prepaid segment is likely to suffer the most as the number of unemployed people increases. The figure could reach up to as many as 7 million people as the economy grinds to a much slower speed than in the past.

The Bank of Thailand last week revised the country’s gross domestic product (GDP) numbers down to -8.1 per cent from the previous projection it put out in March when it had anticipated a slowdown of -5.3 per cent for 2020.

The double-digit (20+ per cent) decline in exports and the total halt of the tourists over the second quarter are likely to have a much bigger impact than what GULF may have estimated when it purchased the shares of INTUCH.


Tourist SIM card accounts for about 7-8 per cent of all overall prepaid SIMs in Thailand, and with the airports shutting down, the number of tourists buying prepaid SIMs has grounded to a halt for all operators.

“We have seen an impact from this segment and it is not likely to pick up until the end of 2020,” said another high-level executive who did not want to be named, as their firm is in a silent period ahead of the results in two weeks.

Tourists, migrant workers and local Thais are the keys to this segment, and two out of the three have been greatly impacted by the coronavirus.

Tourists numbers have ground to a halt, while migrant workers are out of work with many having moved back to their home country. 

Local Thais have also seen their salaries cut or have lost their jobs. All of this is impacting the three mobile phone operators.

Advanced Info also said in its announcement to the SET that the “Telecommunication sector was affected from faded tourists and decline in new subscriber acquisition as a large number of telecom shops residing in shopping malls were mandated to close [during the lockdown.]”

Advanced Info added that the firm has suffered from both inbound and outbound tourists fading.

It said that the revenue from internal roaming and prepaid tourist SIM which normally contributes around 2-2.5 per cent of service revenue declined by 43 per cent year-on-year.

Apart from this, prepaid subscribers for Advanced Info also declined by 891,000 due to the sharp drop in tourist SIMs while postpaid acquisition and handset subsidy slowed down from temporary shop closure, which resulted in slower net add.

With intense competition in prepaid and reintroduction of unlimited data for postpaid plan, average revenue per user continued to decline (242 baht, -1.6 per cent YoY, -4.1 per cent quarter on quarter) while data consumption surged (14.7GB, +29 per cent YoY, +16 per cent QoQ), also elevated by the demand during the lockdown.

Government to the Rescue

The National Broadcasting and Telecommunication Commission (NBTC) also helped the surge in date by offering 100 minutes of free phone calls and 10G of data for all those who applied for the free packages from the government scheme.

This short-term measure lasted until the end of May and the impact of the slowdown in usage would most likely be visible from July 1 onwards.

The 5,000 baht handout for a period of 3-months until June 2020 would also give some leeway to consumers who top-up a small amount of money in order to keep their data connectivity.

Advanced Info, the cash cow of INTUCH, said that the aggressive data price plans and the COVID-19 impact have resulted in ARPU dilution: -4.1 per cent QoQ to 242 baht on a blended basis.

Although during the first quarter of 2020, the firm’s fixed broadband subscribers stood at 1,090,400, adding 52,800 in the quarter, but this fiber optic segment of the business also saw the net additions slowing down both quarter-on-quarter and year-on-year.

Yupapin said that if there were more opportunities then GULF may look to invest but they would not take a management role in the company.

Industry experts believe that GULF’s dream of owning more of INTUCH could be possible as the company’s second-quarter results are unlikely to be any better than their first quarter. This could prompt a decline in the share price during the third quarter after the Q2 results are announced.

GULF’s dream of getting a 4-5 per cent dividend yield may also be difficult to achieve as INTUCH’s revenues from most businesses are likely to suffer during the course of 2020 amid the impact from the coronavirus.

Investors have also questioned the logics of GULF acting as an investment vehicle, they say that if investors want to buy INTUCH the investors could go and buy the shares themselves and people who invest in GULF are investing for the energy-related investments not for its action as a fund manager or diversified holdings

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