Thai Rating and Information Services Co., Ltd. (TRIS) announced Wednesday 7 February 2001 that it has assigned the "AA-" ratings to Advanced Info Service PLC's (ADVANC) Bt8,000 and Bt12,000 million senior debentures. The ratings reflect the strong market demand for mobile phones in Thailand, ADVANC's leading position in the market, and its strong and growing cash flow generation. However, these strengths are partially offset by regulatory uncertainty and potential intensification of competition in the near future from new players. The ratings also take into consideration sizeable capital investments required in the next two to three years, which must be partly debt financed.
TRIS reported that demand for mobile phones in Thailand is expected to continue to grow in the future. Although annual subscriber growth may not be as impressive as the 53% growth posted in 2000, it should continue to be in double digits. Growth will be driven mainly by declining costs of entry and usage and various attractive features launched by the mobile phone operators. After being cut by 30% to 40% in 2000, handset prices will fall further in 2001. A relatively low penetration rate of 6.1% at the end of 2000 is another supporting factor for growth. These opportunities encourage new players to jump into the market, which will intensify the competitive environment.
TRIS said that ADVANC is the market leader in mobile phones with almost 2 million subscribers and a market share of about 52% as of December 2000. ADVANC's subscriber base increased by 60% during 2000, far ahead of its direct rival, Total Access Communication PLC (TAC), whose subscriber base rose by 46%. While these two dominant players will likely lose market share to new players, revenue streams may not be affected because of higher traffic volumes from lower prices and new service offerings. To remain competitive, the incumbent operators must enhance their networks to improve service quality, be able to offer new services and increase revenues from traffic growth. Capital expenditures that ADVANC will incur during the next three years will be approximately Bt44 billion, which is almost equal to the accumulated amount it spent from its establishment until 2000. Part of this investment will have to be debt financed as internal cash flow will not be sufficient.
ADVANC's cash flow generation in 2000 improved substantially due to dramatic growth in mobile phone demand. Funds from operation (FFO) for the first nine months of 2000 at Bt9,974 million surpassed the Bt8,357 million recorded for the whole year 1999. Total debt rose from Bt6,875 million at the end of 1999 to Bt13,331 million as of 30 September 2000 and will reach Bt20,000 million in 2001 to finance an aggressive expansion plan. Although FFO-to-total debt declined from a high of 121.6% in 1999 to around 95% in 2000 and is expected to decline to 60% to 80% in the next two years, it remains high. Operating profit margin before depreciation and amortization rose from 37.7% for 1999 to 41.7% for the first nine months of 2000, benefiting from the economies of scale.
TRIS added that the government has a clear direction to liberalize the telecommunication industry, which will create greater competition. However, because the time frame and structure of the liberalization is still uncertain, it is too early to evaluate the full impact on existing operators.
Advanced Info Service PLC (ADVANC) Issue Rating AIS#10: Bt8,000 million senior debentures due 2003 Upgraded to AA- from A+ AIS063A: Bt12,000 million senior debentures due 2006 AA-
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TRIS reported that demand for mobile phones in Thailand is expected to continue to grow in the future. Although annual subscriber growth may not be as impressive as the 53% growth posted in 2000, it should continue to be in double digits. Growth will be driven mainly by declining costs of entry and usage and various attractive features launched by the mobile phone operators. After being cut by 30% to 40% in 2000, handset prices will fall further in 2001. A relatively low penetration rate of 6.1% at the end of 2000 is another supporting factor for growth. These opportunities encourage new players to jump into the market, which will intensify the competitive environment.
TRIS said that ADVANC is the market leader in mobile phones with almost 2 million subscribers and a market share of about 52% as of December 2000. ADVANC's subscriber base increased by 60% during 2000, far ahead of its direct rival, Total Access Communication PLC (TAC), whose subscriber base rose by 46%. While these two dominant players will likely lose market share to new players, revenue streams may not be affected because of higher traffic volumes from lower prices and new service offerings. To remain competitive, the incumbent operators must enhance their networks to improve service quality, be able to offer new services and increase revenues from traffic growth. Capital expenditures that ADVANC will incur during the next three years will be approximately Bt44 billion, which is almost equal to the accumulated amount it spent from its establishment until 2000. Part of this investment will have to be debt financed as internal cash flow will not be sufficient.
ADVANC's cash flow generation in 2000 improved substantially due to dramatic growth in mobile phone demand. Funds from operation (FFO) for the first nine months of 2000 at Bt9,974 million surpassed the Bt8,357 million recorded for the whole year 1999. Total debt rose from Bt6,875 million at the end of 1999 to Bt13,331 million as of 30 September 2000 and will reach Bt20,000 million in 2001 to finance an aggressive expansion plan. Although FFO-to-total debt declined from a high of 121.6% in 1999 to around 95% in 2000 and is expected to decline to 60% to 80% in the next two years, it remains high. Operating profit margin before depreciation and amortization rose from 37.7% for 1999 to 41.7% for the first nine months of 2000, benefiting from the economies of scale.
TRIS added that the government has a clear direction to liberalize the telecommunication industry, which will create greater competition. However, because the time frame and structure of the liberalization is still uncertain, it is too early to evaluate the full impact on existing operators.
Advanced Info Service PLC (ADVANC) Issue Rating AIS#10: Bt8,000 million senior debentures due 2003 Upgraded to AA- from A+ AIS063A: Bt12,000 million senior debentures due 2006 AA-
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