TRIS Rating Co., Ltd. has assigned a "BBB" rating to Asia Multimedia Co., Ltd. (AM), which reflects AM's strong position as the provider of network transmission for United Broadcasting Corporation PLC (UBC), who is the leading pay TV company in Thailand; favorable growth prospects for the data communication business; business synergy from True Corporation PLC (TRUE) Group, formerly known as TelecomAsia Corporation PLC (TA); and its acceptable financial profile characterized by high profitability and adequate cash flow. AM's debts increased substantially after receiving debts transferred from Telecom Holding Co., Ltd. (TH), AM's parent, in exchange for 133.18 million shares of UBC. AM's management now has a policy not to receive any debts or obligations nor grant loans to related parties. The rating is based on confirmation of this new policy by AM's management. These strengths are partially offset by the threat of substitution from alternative forms of transmission, customer concentration risk, and intense competition in the data communication business. The rating also takes into consideration the uncertainty surrounding revenues from its new business: data communication.
TRIS Rating reported that AM was granted a license to provide non-POTS (plain old telephone service) service for 20 years. AM's hybrid fiber coaxial (HFC) networks reach more than 2.1 million households in Thailand. Under contract, AM provides network transmission service to UBC, the only nationwide provider of pay television in Thailand. Pay TV has bright prospects since Thailand's pay TV penetration rate is considered low compared with other countries. In addition, more spending on entertainment is expected for the current stage of the economic expansion. However, the slow growth in UBC subscribers during 2002-2003 was due to piracy problem and its own subscription price increasing. Pay TV can be divided into two categories: cable TV (CATV) and satellite TV (DSTV). As of December 2003, UBC had 138,212 CATV subscribers or 32% of total pay TV subscribers. During the last few years, CATV has continually lost share to DSTV, declining from 44% in 1999 to 32% in 2003. Coverage area is the main disadvantage of CATV. However, CATV has better signal transmission quality and no delays, unlike DSTV. Although AM is exposed to customer concentration risk because over 80% of its revenues is generated from UBC during 2001-2003, the contribution from UBC is expected to decline to around 60% over the next several years as AM focuses more on its data communication business.
TRIS Rating said that Thailand still has a low penetration rate for Internet use and broadband/online use. These markets are expected to have bright prospects, due to demand from both corporate groups and retail consumers. The government policy to promote usage of modern technology is one major factor boosting demand for high-speed data communication. However, in terms of supply, there are several service providers in the market. Service prices have been decreasing due to higher competition, which is in line with trends in the world broadband market.
In addition to the cross-shareholding arrangements among AM, UBC, and TRUE, AM is considered a crucial infrastructure provider for UBC and TRUE group. AM presently acts as the key service provider of network transmission for UBC. AM also has its own marketing team to serve its clients the services, such as cable modem and data communications. As a subsidiary of TRUE group, AM benefits from service bundling with the group. TRUE offers its clients fixed lines service, wireless, Internet, and multimedia, bundled together with service from AM. According to TRIS Rating, AM's dependency on its ultimate parent is also taken into account in the rating.
AM's total debt to capitalization ratio was 30.8% at the end of September 2003. After issuing debentures to refinance existing debt and to fund its upcoming capital expenditures, AM's total debt will increase from Bt1,722 million to Bt2,200 million. The company plans to invest around Bt1,200 million to build a fiber optic network to support its data communication customers and TA Orange, which is AM's main customer. AM's cable revenues are expected to generate stable cash flow of around Bt400 million a year due to its fixed price service agreement with UBC. EBITDA interest coverage was 3.8 times for the first nine months of 2003, TRIS Rating said. -- End
Asia Multimedia Co., Ltd. (AM)Company Rating: BBB
TRIS Rating reported that AM was granted a license to provide non-POTS (plain old telephone service) service for 20 years. AM's hybrid fiber coaxial (HFC) networks reach more than 2.1 million households in Thailand. Under contract, AM provides network transmission service to UBC, the only nationwide provider of pay television in Thailand. Pay TV has bright prospects since Thailand's pay TV penetration rate is considered low compared with other countries. In addition, more spending on entertainment is expected for the current stage of the economic expansion. However, the slow growth in UBC subscribers during 2002-2003 was due to piracy problem and its own subscription price increasing. Pay TV can be divided into two categories: cable TV (CATV) and satellite TV (DSTV). As of December 2003, UBC had 138,212 CATV subscribers or 32% of total pay TV subscribers. During the last few years, CATV has continually lost share to DSTV, declining from 44% in 1999 to 32% in 2003. Coverage area is the main disadvantage of CATV. However, CATV has better signal transmission quality and no delays, unlike DSTV. Although AM is exposed to customer concentration risk because over 80% of its revenues is generated from UBC during 2001-2003, the contribution from UBC is expected to decline to around 60% over the next several years as AM focuses more on its data communication business.
TRIS Rating said that Thailand still has a low penetration rate for Internet use and broadband/online use. These markets are expected to have bright prospects, due to demand from both corporate groups and retail consumers. The government policy to promote usage of modern technology is one major factor boosting demand for high-speed data communication. However, in terms of supply, there are several service providers in the market. Service prices have been decreasing due to higher competition, which is in line with trends in the world broadband market.
In addition to the cross-shareholding arrangements among AM, UBC, and TRUE, AM is considered a crucial infrastructure provider for UBC and TRUE group. AM presently acts as the key service provider of network transmission for UBC. AM also has its own marketing team to serve its clients the services, such as cable modem and data communications. As a subsidiary of TRUE group, AM benefits from service bundling with the group. TRUE offers its clients fixed lines service, wireless, Internet, and multimedia, bundled together with service from AM. According to TRIS Rating, AM's dependency on its ultimate parent is also taken into account in the rating.
AM's total debt to capitalization ratio was 30.8% at the end of September 2003. After issuing debentures to refinance existing debt and to fund its upcoming capital expenditures, AM's total debt will increase from Bt1,722 million to Bt2,200 million. The company plans to invest around Bt1,200 million to build a fiber optic network to support its data communication customers and TA Orange, which is AM's main customer. AM's cable revenues are expected to generate stable cash flow of around Bt400 million a year due to its fixed price service agreement with UBC. EBITDA interest coverage was 3.8 times for the first nine months of 2003, TRIS Rating said. -- End
Asia Multimedia Co., Ltd. (AM)Company Rating: BBB