TRIS Assigns a "A-" to TAC's Issues
Thai Rating and Information Services Co., Ltd. (TRIS) announced Friday 22 September 2000 that it has assigned a "A-" rating to Total Access Communication PLC's (TAC) Bt6,000 million senior debentures. The rating reflects strong growth in demand for mobile phone services in Thailand, benefits from synergy with TAC's strategic partner, its strong market position and its improving financial flexibility. These strengths are partially offset by the uncertain regulatory environment, potential intensification of competition and the need for substantial capital expenditures in the future.TAC holds 42% of the mobile phone market share in Thailand after the market leader, Advanced Info Service PLC (ADVANC), which has 52%. TRIS reported that having Telenor Asia Pte Ltd. (Telenor), a wholly owned subsidiary of Telenor AS from Norway, as a strategic partner should improve TAC's competitive edge by providing technological support, extensive marketing experience and bargaining power to purchase networks and handsets. The capital injection of US$262.5 million received when Telenor acquired a total of 70 million newly issued shares in TAC between June and August 2000 meaningfully improves TAC's capital structure by reducing its total debt to capitalization to approximately 55% from over 70% in 1999. Under a bank loan facility agreement signed in July 2000, TAC will receive a Bt20,000 million credit facility that will provide financial flexibility for the redemption of US$435 million debts that come due in 2001. To broaden its coverage area, TAC plans to invest more than Bt4,000 million per year for the next three years in network expansion. TRIS is concerned that this substantial investment may lead to higher gearing. TRIS said that mobile phone subscribers in Thailand grew 16% in 1999 and 15% during the first half of 2000, and as the economy recovers demand for mobile phone services should continue to grow. The low penetration rate for mobile phones, 4%, also indicates that the Thai market has room to grow. Lower entry cost for consumers, prepaid subscription programs and the convergence of mobile phones and the internet should stimulate growth. However, with the new telecommunication law still undergoing parliamentary scrutiny, the regulatory environment remains uncertain. The National Telecommunication Committee (NTC), the sector regulator responsible for issuing regulations to govern telecommunication businesses to ensure fair competition, prescribe fee structures and protect consumer rights, has not yet been selected, which adds to the uncertainty.
More operators in the market, such as ACT Mobile Co., Ltd., the re-entry of Wireless Communication Service Co., Ltd. (WCS), and the possibilities of new operators after liberalization are negative factors. Currently, WCS is seeking a foreign strategic partner. This will bring more intensive competition in the future.
Total Access Communication PLC (TAC)Issue RatingTAC#1: Bt6,000 million senior debentures due 2005 A-