TRIS Assigns An "A" Rating to ADVANC's Issue
Thai Rating and Information Services Co., Ltd. (TRIS) announced Tuesday 29 February 2000 that it has assigned its "A" rating to Advanced Info Service PLC's (ADVANC) Bt8,000 million senior unsecured debenture due 2003. The rating reflects the strong market demand for mobile phones in Thailand, the company's leading position in the market and its sound financial position. However, these strengths are somewhat offset by regulatory uncertainty. Also, ADVANC's requirement for sizeable capital investments in the future is a concern.
TRIS believes that the average growth rate of mobile phone subscribers in Thailand should be at least 10% per annum during the next three years. Growth will be driven by three major factors: the recovery of the Thai economy, declining costs of entry and usage, and various attractive features launched by the mobile phone operators. In the past, mobile phone operators made significant profits from handset sales, but increased competitive pressures and operators' huge investment commitments in their networks have forced them to focus on recurring income instead of one-off income from handset sales. Lower handset prices and more innovative features introduced through new technology are effectively attracting new customers. According to TRIS's report, ADVANC's subscriber base increased 23% in 1999. The company has more than 1.2 million subscribers and a market share of about 49% as of December 1999. An Bt8.28 billion capital injection from ADVANC's strategic partner, SingTel Strategic Investment Private Ltd., in February 1999 together with strongly improved operations in 1999 significantly strengthened ADVANC's financial status. In the nine months ending September 1999, ADVANC's operating profit before depreciation and amortization rose by 59% to Bt6.8 billion while servicing and rental revenues increased by 13% to Bt13 billion. Total debt as of December 1998 was Bt13.4 billion or 55% of total capital. By September 1999, total debt declined to Bt6.99 billion or 25% of total capital.
However, telecommunication operators are subject to regulatory risk and potential intense competition if other operators can join with strong strategic partners. The government has a clear policy to liberalize this industry but the timeframe and final structure has not yet been finalized. The Thai telecommunication industry must open to free competition before 2006 to meet the government's commitment to the World Trade Organization.
Note: Advanced Info Service PLC (ADVANC)
Issue rating
AIS#10: Bt8,000 million senior unsecured debenture due 2003 A