TRIS Rating Co., Ltd. has assigned the rating of “BBB-” to the proposed issue of up to Bt6 billion in senior debentures of True Corporation PLC (TRUE). At the same time, TRIS Rating has affirmed the company rating of TRUE and the ratings of its senior secured debentures at “BBB” and senior debentures at “BBB-”. The outlook remains “stable”. TRUE’s credit ratings reflect the leading position of TRUE as the integrated telecom company; competent management team; and growth prospects of Broadband Internet, wireless technology, and pay-TV segment. These strengths are offset by the company’s high leverage, fierce competition in core businesses, aggressive capital spending, and uncertainty of telecommunication regulation. The “stable” outlook reflects an expectation that TRUE’s high debt to capitalization ratio will be balanced with improving earning power. Over the next 12 months, the auction for 3G licenses is a key event that could have a significant implication on TRUE’s business and financial profiles. TRIS Rating’s baseline expectation assumes TRUE’s competitive position will not change dramatically and its funding will be balanced with fresh equity injections.
TRIS Rating reported that TRUE is Thailand’s leading integrated telecom service provider. The company’s three businesses comprise wireline which is operated by TrueOnline, wireless by TrueMobile (including TrueMove, TrueMove H, and Hutch CDMA brands) and pay-television (pay-TV) by TrueVisions. In the first quarter of 2012, the three businesses contributed 36%, 48%, and 16% in terms of revenue.
TRIS Rating said, TRUE holds a strong position in the Broadband Internet market, reflecting its extensive fixed line network coverage in Greater Bangkok. The company is also the largest pay-TV operator and the third rank mobile phone operator in Thailand. The growth in broadband Internet communications and broadcasting services are two crucial areas that should support TRUE’s business fundamental over the medium term. TRUE’s credit ratings take into account strong supports from CP Group, the company’s largest shareholder.
TRUE is aggressively expanding its 3G (third generation) services under its agreements with CAT Telecom PLC (CAT) to gain competitive edge and to capture market appetite for 3G data services. However, the company’s first-mover advantage on 3G 850 MHz is unlikely to be maximized if the auction of 3G 2100 MHz licenses arrives in late 2012. TRUE’s credit profile should be negatively impacted if its wireless segment could not further expand services or utilize invested infrastructure as a result of the on-going legal challenges over its 3G agreements with CAT.
TRUE’s financial profile is weak. Its balance sheet is highly levered. However, its relatively stable revenues and margins provide a good cash flow visibility. TRUE’s revenue is expected to grow satisfactorily in 2012 due to aggressive 3G service expansion. The company’s operating margins have dropped markedly since 2011 due to a rise in operating costs and TrueMove’s higher concession rate.
TRUE’s debt-to-capitalization ratio stood at 80.5% at the end of March 2012. If TRUE spends Bt23 billion in capital expenditures as planned, its leverage ratio is expected to rise to 84% by year end. This will likely exert a downward pressure on the company’s ratings should the ratio stay elevated at such level in the medium term. To support future investments, TRUE is expected to raise new debts with an appropriate level of equity injections so as to sustain its capital structure and cash flow protection profiles. The ratings of TRUE’s senior debentures are one notch below the company rating due to a high level of secured debts compared with total assets, said TRIS Rating. — End
Company Rating: Affirmed at BBB Issue Ratings: TRUE13NA: Bt1,100 million senior debentures due 2013 Affirmed at BBB- TRUE144A: Bt6,183 million senior secured debentures due 2014 Affirmed at BBB TRUE144B: Bt1,800 million senior debentures due 2014 Affirmed at BBB- TRUE151A: Bt7,000 million senior secured debentures due 2015 Affirmed at BBB Up to Bt6,000 million senior debentures due within 2016 BBB- Rating Outlook: Stable
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