Following the recent auctions of new 1800-megahertz (MHz) and 900-MHz spectrum licenses during November-December 2015, TRIS Rating views that the impact on credit ratings of rated telecom operators will rely on the evolvement of the industry structure and their strategy to counter the competition. Four telecom operators rated by TRIS Rating include True Corporation PLC (TRUE) (BBB+/Stable), True Move H Universal Communication Co., Ltd. (TUC) (BBB+/Stable), Total Access Communication PLC (DTAC) (AA+/Stable), and dtac TriNet Co., Ltd. (DTN) (AA+/Stable). However, the ratings will be monitored as new developments emerge in the industry.
TRUE and Jasmine International PLC (JAS) won the 900-MHz bidding at a record price of Bt76.3 billion and Bt75.6 billion, respectively. Meanwhile, TRUE and Advance Info Service PLC (ADVANC) previously secured the 1800-MHz spectrum license, at Bt39.8 billion and Bt41 billion, respectively. Competition is expected to intensify, given the entry of a new competitor to the market and the defensive strategies employed by the existing players that could eventually trigger the price war.
TRUE can secure much larger spectrum bandwidth in hand after securing both 900-MHz and 1800-MHz spectrum licenses which could strengthen its competitive position. TRUE offered a price for each license that was higher than the price estimates in TRIS Rating’s base-case scenario. The final price of 900-MHz spectrum was nearly 5 times the reserve price while that of 1800-MHz spectrum was about 2.5 times. Although the National Broadcasting and Telecommunications Commissions (NBTC) relaxes the payment scheme of 900-MHz license which about 80% of the license cost will be paid in 2019, TRUE's financial profile is expected to weaken in the near term. The improvement in business profile is hinged on TRUE’s ability to acquire new subscribers to satisfy the return on investment. In addition, TRIS rating expects TRUE will continue to receive support from the Charoen Pokphand (CP) Group and its strategic partner -- China Mobile International Holdings Ltd. (China Mobile).
In the meantime, DTAC now faces spectrum constraints as the concessions for the 850-MHz and 1800-MHz spectrums will expire in 2018. Although DTAC has sufficient bandwidth, utilizing the spectrum under concession regime will disadvantage DTAC on regulatory cost, compared with peers. Failure in securing the new license in 2015 will put pressure on DTAC for the auction in the future. Fierce competition, comparatively higher cost, and investment in concession assets with short remaining life could possibly hurt DTAC’s credit quality in the long term. TRIS Rating will closely monitor DTAC’s strategy to maintain its competitive position and profitability.
ADVANC, as the market leader in mobile communication industry, could secure 30 MHz bandwidth in 2100-MHz and 1800-MHz spectrums which may not enough to maintain its service quality. Therefore, ADVANC has initiated the cooperation with other spectrum holder in order to ensure the sufficient bandwidth and to protect its subscriber base. The cost of future arrangement should be absorbed by ADVANC’s strong financial profile.
TRIS Rating will continue to monitor the course of development in the industry, including the industry prospect and fundamentals, the degree of competition, plus the credit quality of the rated operators.
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