INTERVIEW-UPDATE 1-Thai AIS sees $2.2 bln 3G capex, lower costs

* Plans to invest 25 bln baht a year on 3G in 3 years

* No plan to seek new partner to join 3G auction

* Regulatory costs seen down to 6-8 pct under 3G licence

* 3G launch could turn AIS into growth stock (Adds details)

BANGKOK, Sept 16 - Top Thai mobile phone operator Advanced Info Service PCL (AIS) said on Wednesday it planned to invest 75 billion baht ($2.2 billion) over the next three years to install a third-generation (3G) mobile network.

AIS was keen to bid for a licence on the 15 MHz bandwidth, which has large capacity to serve its 28 million subscribers, and it had no plan to seek a new partner to bid for the 3G licence, Chief Executive Officer Wichian Mektrakarn told Reuters.

"The budget for the first three years will be 25 billion baht each year. For the first year, it may be lower than that because prices of telecoms equipment have come down recently as global operators shift to more advanced technology," Wichian said in an interview.

Thailand has lagged other countries in Asia on 3G. Other developed markets such as Singapore and Japan are already moving towards the next-generation mobile technology, so the "old" 3G technology has become cheaper.

AIS has set up a wholly owned subsidiary, Advanced Wireless Network, to take part in the 3G auction and it would take around 6-7 months to install networks and launch broadband Internet on 3G in the second half of 2010, Wichian said.

The telecoms regulator approved draft terms last week for the long-awaited auctions for 3G operating licences, paving the way for the licences to be issued early next year.

If it gets a licence, AIS's regulatory costs -- what it pays to the state to operate phone services -- are expected to fall to about 6-8 percent of revenue, excluding an expected one-off upfront payment, from about 25-26 percent now, Wichian said.

The 3G licensing is a key step in reforming the $4.7 billion telecoms sector as it will change the way operators pay regulatory fees and should lead to a reduction in costs.

Under the current concession system, AIS pays 25-26 percent of quarterly revenue to state-owned TOT for the right to operate a network AIS built itself, and the network becomes state property once the concession expires in 2015.

3G OFFERS LONG-TERM GROWTH

With the looming expiry of the concession, AIS, like other operators, needed the new 3G licence to secure its long-term business prospects, Wichian said.

"The 3G licence is very important to us. Why do we have to invest in a network that will belong to someone else? With the new licence, the network will be our asset and costs are cheaper," Wichian said.

To maximise benefits from the 3G licence, AIS is expected to gradually migrate its existing customers to the new network, Wichian said, but declined to say when that would be done.

Competition in the mobile sector is expected to intensify, which might lead to handset subsidies or a price war after the 3G launch, he said, adding: "The market will be tough."

AIS, 21.4 percent owned by Singapore Telecommunications Ltd , has about 50 percent of the domestic mobile market, ahead of Total Access Communication's (TAC) roughly 30 percent. TAC is controlled by Norway's Telenor .

AIS, which normally generates cash flow of about 30 billion baht a year, has sufficient funds to join the auction, and the company would raise funds from bank loans or the domestic bond market to make sure it gets low financial costs, Wichian said.

AIS, which is seen as dividend stock by many analysts, would become a growth stock because the 3G service would bring new sources of revenue from downloading data, music and online games via mobile phones, Wichian said.

AIS shares, which reached a 16-month high of 98.50 baht last Friday, closed unchanged at 96 baht on Wednesday. The overall Thai stock market was 1.01 percent higher. ($1=33.75 Baht)