On September 8, 2021, Advanced Info Service Public Company Limited (ADVANC) announced the settlement of a dispute with National Telecom Plc. (NT), agreeing to pay NT 447.87 million baht in compensation. Both parties subsequently filed a withdrawal of the dispute with the Administrative Court and agreed not to pursue any future claim based on the settled disputes.
Kasikorn Securities (KS) highlighted in its ICT Sector analysis that while this legal settlement appears to be beneficial to ADVANC, it also implies a settlement rate of 27.4% of the claim amount in instances with adverse verdicts.
KS noted that it has been common practice in the ICT sector to settle legal disputes rather than await a final court decision. ADVANC currently has 13 pending claims in various jurisdictions totaling 141.5 billion baht, with the initial lower court issuing only two negative verdicts totaling 63.6 billion baht.
Total Access Communication Public Company Limited (DTAC) is involved in seven legal cases totaling 31.6 billion baht, with the preliminary lower court finding against only one, totaling 26.7 billion baht. Meanwhile, True Corporation Public Company Limited (TRUE) is embroiled in 24 judicial cases (excluding a counter lawsuit) with a total claim of 85 billion baht, nine of which resulted in unfavorable verdicts with a total claim of 22.2 billion baht.
As a result, KS assessed that if the settlement rate is applied, it would have a negative impact on the valuation of those three equities. ADVANC could lose 6.4 baht per share, DTAC could lose 3.4 baht per share, and TRUE could lose 0.2 baht per share.
However, KS still has a favorable view on the ICT sector, reiterating its Positive with the following potential rerating catalysts: 1) more aggressive capital management; 2) value generation through an asset spinoff under the towerco model; and 3) a prospective acquisition. However, challenges include the following: 1) dismal near-term results due to weak consumption; 2) a subsidy battle for 5G handsets; and 3) the possibility of legal settlement losses. ADVANC remains the top sector pick when risk-reward is considered.