TRIS Rating Co., Ltd. has affirmed the company rating of TelecomAsia Corporation PLC (TA) at "BBB" and issue ratings of "BBB" for TA's Bt15,034.40 million senior secured debentures (TA087A and TA07OA). TRIS Rating also affirms a rating at "A" for Bt6,750 million worth of senior secured debentures (TA112A), partially guaranteed (50% of principal) by the International Finance Corporation (IFC). The ratings reflect the company's position as the leading integrated fixed-line telecommunications company in Bangkok, the company's competent management team and its growth strategy encompassing investments in wireless services. These strengths are partially offset by the company's vulnerable financial position (on a stand-alone basis) stemming from its significantly high leverage, the threat of product substitution from mobile phones, and the remaining uncertainty surrounding the telecommunications regulatory framework. While the credit ratings of the TA087A and TA07OA issues are based solely on TA's creditworthiness, the credit rating of the TA112A issue is enhanced by the partial guarantee provided by IFC, which is a member of the World Bank Group and is rated "AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service.
TRIS Rating reported that TOT Corporation PLC (TOT) awarded TA a concession for 2.6 million fixed telephone lines in the Bangkok metropolitan area (BMA). The 25-year BTO (Build-Transfer-Operate) concession contract ends in 2017. TA and TOT are the only two fixed-line suppliers in the BMA. TA gained market share at the expense of its concession owner and sole competitor. TA has significantly increased its market share from 2% in 1993 to 58% at the end of Y2002. However, its market share declined slightly to 57% at the end of the first quarter 2003. After acquiring Bangkok Inter Teletech Co., Ltd. (BITCO), TA has become one of Thailand's most integrated telecommunications operators, providing both fixed-line and wireless services. BITCO owns TA Orange, which operates the 1800 MHz wireless system. TA Orange's growth strategy to increase its customer base is likely to hurt TA's profitability in the short term. However, in the long run, service integration and synergy should yield potential benefits.
TRIS Rating said, industry regulations and huge network investments create high barriers to entry for newcomers. However, the rapid popularity and pricing flexibility of mobile phones, a quasi-substitute for fixed-line services, could constrain the growth of fixed-line and Personal Communication Telephone (PCT) services. Fixed line operators may sustain their growth and profitability by selling more value-added services and data communications and improving their operation efficiency. However, the ICT Ministry has approved all fixed line operators to launch joint reduced tariff promotions to better compete with cellular operators starting September 2003.
TRIS Rating said, TA's net debt-to-capitalization ratio is quite high, registering 88.1% in 2002 and increasing to 93.2% at the end of September 2003. TA had high operating margins (before depreciation and amortization) of 44.6% in 2001, improving to 45.39% in 2002 and 49.4% for the first nine months of 2003. In contrast, TA reported a pretax return on permanent capital of -1.8% for the first nine months of 2003. The funds from operations to net debt ratio improved from 9.0% in 2001 to 13.9% in 2002 and was 11.3% for the first nine months of 2003. Adjusted EBITDA interest coverage (which excludes the non-cash share of net results from subsidiaries, joint ventures and associates and includes cash dividends received) increased from 2.3 times in 2001 to 3.1 times for the first nine months of 2003. -- End
TelecomAsia Corporation PLCCompany Rating: Affirmed at BBBIssue Ratings:TA087A: Bt11,715.40 million senior secured debentures due 2008 Affirmed at BBBTA112A: Bt6,750 million senior secured partially guaranteed debentures due 2011 Affirmed at ATA07OA: Bt3,319 million senior secured debentures due 2007 Affirmed at BBB
TRIS Rating reported that TOT Corporation PLC (TOT) awarded TA a concession for 2.6 million fixed telephone lines in the Bangkok metropolitan area (BMA). The 25-year BTO (Build-Transfer-Operate) concession contract ends in 2017. TA and TOT are the only two fixed-line suppliers in the BMA. TA gained market share at the expense of its concession owner and sole competitor. TA has significantly increased its market share from 2% in 1993 to 58% at the end of Y2002. However, its market share declined slightly to 57% at the end of the first quarter 2003. After acquiring Bangkok Inter Teletech Co., Ltd. (BITCO), TA has become one of Thailand's most integrated telecommunications operators, providing both fixed-line and wireless services. BITCO owns TA Orange, which operates the 1800 MHz wireless system. TA Orange's growth strategy to increase its customer base is likely to hurt TA's profitability in the short term. However, in the long run, service integration and synergy should yield potential benefits.
TRIS Rating said, industry regulations and huge network investments create high barriers to entry for newcomers. However, the rapid popularity and pricing flexibility of mobile phones, a quasi-substitute for fixed-line services, could constrain the growth of fixed-line and Personal Communication Telephone (PCT) services. Fixed line operators may sustain their growth and profitability by selling more value-added services and data communications and improving their operation efficiency. However, the ICT Ministry has approved all fixed line operators to launch joint reduced tariff promotions to better compete with cellular operators starting September 2003.
TRIS Rating said, TA's net debt-to-capitalization ratio is quite high, registering 88.1% in 2002 and increasing to 93.2% at the end of September 2003. TA had high operating margins (before depreciation and amortization) of 44.6% in 2001, improving to 45.39% in 2002 and 49.4% for the first nine months of 2003. In contrast, TA reported a pretax return on permanent capital of -1.8% for the first nine months of 2003. The funds from operations to net debt ratio improved from 9.0% in 2001 to 13.9% in 2002 and was 11.3% for the first nine months of 2003. Adjusted EBITDA interest coverage (which excludes the non-cash share of net results from subsidiaries, joint ventures and associates and includes cash dividends received) increased from 2.3 times in 2001 to 3.1 times for the first nine months of 2003. -- End
TelecomAsia Corporation PLCCompany Rating: Affirmed at BBBIssue Ratings:TA087A: Bt11,715.40 million senior secured debentures due 2008 Affirmed at BBBTA112A: Bt6,750 million senior secured partially guaranteed debentures due 2011 Affirmed at ATA07OA: Bt3,319 million senior secured debentures due 2007 Affirmed at BBB