Thai Rating and Information Services Co., Ltd. (TRIS) announced Thursday 28 October 1999 that it placed the rating of Shin Satellite PLC's (SSA) Bt3,000 million senior debenture at "BBB+." The rating reflects the good prospects of Thailand's satellite communication industry and SSA's strong position in the domestic market. Its decision to postpone launching new satellites will help improve its financial position. However, the rating is offset by SSA's high gearing ratio and the expiration of the government's protection over the industry which will allow competition in the company's domestic market. In addition, prolonged economic sluggishness raises some concerns over its ability to maintain revenue growth and high cash-generating operations.
Demand for satellite transmissions in Thailand has increased continuously for the past few years, in spite of the country's economic recession. Domestic satellite transponder utilization has increased from 13 transponders in 1994 to around 26 transponders as of June 1999. With its high quality transmission of voice, data and video through high bandwidth and data compression techniques, satellite transmission systems are forecast to have good prospects in communication activities, especially for broadcasting. For telecommunications, satellite transmission has a competitive advantage over terrestrial networks such as optical fiber especially between distant areas and in low population density areas. At the present, SSA is the only satellite operator in Thailand. Since it launched its first satellite in 1994, SSA's operation has grown considerably. Its service revenue increased from Bt281 million in 1994 to Bt2,416 million in 1998 of which transponder leasing accounted for 88%. Currently, SSA provides satellite transmission and related services through its three satellites that offer a total of 43 C-band and 18 Ku-band transponders and a ground service station. In five years, the number of its utilized transponders increased from 13 to 38 in 1998. Its past business performance benefited from 8-year exclusive rights protecting it from competition in the domestic market. Its new distinctive turnkey service introduced in 1998 has helped it penetrate foreign markets which accounted for 30% of service revenues as of June 1999. However, its short business track record raises concern over its ability to meet challenges from competitors after the regulatory protection expired on 11 September 1999.
SSA has maintained a favorable operating profit margin while other financial ratios have deteriorated because of the baht devaluations impacting on its foreign debt. Increasing paid-up capital by Bt1.75 billion helped improve its capital structure; however, its capital structure has remained high at around 60%. High profits and planned low investments will bring SSA's capital structure to a satisfactory level within the next few years. Issuing Bt3,000-million debenture to repay foreign debt will reduce its foreign exchange risk exposure. Though long-term contracts accounted for 90% of revenue in 1998, prolonged economic sluggishness raises some concern over the company's ability to sustain revenue growth. This could delay its financial improvement.
Note: Shin Satellite PLC (SSA)
Issue rating
Bt3,000 million senior debenture due 2002 BBB+