TRIS Rating Co., Ltd. has affirmed the company rating of Total Access Communication PLC (TAC) and its existing debentures at "A-". The ratings reflect TAC's position as the second largest cellular operator, its improving operating performance and successful marketing activities. These strengths are partially offset by TAC's high financial leverage, an uncertain regulatory environment, and intensifying competition in the industry, especially after new operators entered the market. Although TAC will have to refinance a significant amount of debt maturing in 2006, it can manage this refinancing risk because of its long relationships with many financial institutions, name recognition in the bond market and, more importantly, TAC's improving financial status. While the "positive" outlook reflects TAC's improving financial profile and its ability to maintain market share at acceptable average revenue per user (ARPU) even as it faces strong competition. Its ability to sustain solid operating performance and an improving financial profile will support the rating revision.
TRIS Rating reported that the high growth of the mobile market is driven mainly by competition as each operator appeals to customers through attractive promotions. Competition from new operators such as TA Orange Co., Ltd. (TAO), entering the market in 2002, and Hutchison CAT Wireless Multimedia Ltd. (Hutch), entering in 2003, has increased the level of promotion across the industry. Moreover, TAC's decision to sell subscriber identity module (SIM) cards separately from handsets substantially lowered the cost of entry for new users and thus stimulated higher subscriber additions. The penetration rate of mobile phones in Thailand was around 40% as of August 2004, meaning the market still has room to grow albeit at slower growth rates than in the past.
TRIS Rating said that although new players' competitive edges lag behind the two largest operators in terms of network coverage and other infrastructure, their aggressive promotional packages to build their customer bases have intensified competition. The already high level of competition in the mobile market is expected to remain. Advanced Info Service PLC (ADVANC) and TAC, as market leaders, now use more customer relationship management (CRM) to provide various services to different kinds of customers, which helps both firms maintain their ARPU, a key performance indicator. TAC is the second largest mobile phone operator in Thailand with seven million subscribers as of August 2004, representing 30% market share, the same level as at the end of 2003. At the end of August 2004, TAC's subscriber base had increased approximately 16% over the end of 2003. TAC has successfully launched many new products: "My" for the postpaid market and "Happy Dprompt" for the prepaid market.
TAC delivered satisfactory financial performance in the first nine months of 2004. Its operating margin improved from 29% in 2001 to 31% in 2002, 38% in 2003 and 39% as of the first nine months of 2004. The company's debt to capitalization ratio fell from 63% in 2002, 60% in 2003 to 55% at the end of September 2004, yet this level is still high. TRIS Rating expects that this ratio will improve further because the huge capital expenditures to build a network that can ensure good service quality already occurred during 2001-2002. TAC's cash flow stream has improved but its funds from operations to total debt ratio has stayed low because of its high debt level. This cash flow protection is also expected to increase further resulting from both a lower level of total debt and increased internal cash generation, TRIS Rating daid. -- End
Total Access Communication PLC (TAC) Company Rating: Affirmed at A- Issue Ratings: TAC05OA: Bt6,000 million senior debentures due 2005 Affirmed at A- TAC064A: Bt15,000 million senior debentures due 2006 Affirmed at A- TAC089A: Bt3,000 million senior debentures due 2008 Affirmed at A- TAC089B: Bt2,500 million senior debentures due 2008 Affirmed at A- TAC09OA: Bt4,000 million senior debentures due 2009 Affirmed at A- TAC09OB: Bt1,000 million senior debentures due 2009 Affirmed at A- TAC109A: Bt3,500 million senior debentures due 2010 Affirmed at A- Rating Outlook: Positive from Stable
TRIS Rating reported that the high growth of the mobile market is driven mainly by competition as each operator appeals to customers through attractive promotions. Competition from new operators such as TA Orange Co., Ltd. (TAO), entering the market in 2002, and Hutchison CAT Wireless Multimedia Ltd. (Hutch), entering in 2003, has increased the level of promotion across the industry. Moreover, TAC's decision to sell subscriber identity module (SIM) cards separately from handsets substantially lowered the cost of entry for new users and thus stimulated higher subscriber additions. The penetration rate of mobile phones in Thailand was around 40% as of August 2004, meaning the market still has room to grow albeit at slower growth rates than in the past.
TRIS Rating said that although new players' competitive edges lag behind the two largest operators in terms of network coverage and other infrastructure, their aggressive promotional packages to build their customer bases have intensified competition. The already high level of competition in the mobile market is expected to remain. Advanced Info Service PLC (ADVANC) and TAC, as market leaders, now use more customer relationship management (CRM) to provide various services to different kinds of customers, which helps both firms maintain their ARPU, a key performance indicator. TAC is the second largest mobile phone operator in Thailand with seven million subscribers as of August 2004, representing 30% market share, the same level as at the end of 2003. At the end of August 2004, TAC's subscriber base had increased approximately 16% over the end of 2003. TAC has successfully launched many new products: "My" for the postpaid market and "Happy Dprompt" for the prepaid market.
TAC delivered satisfactory financial performance in the first nine months of 2004. Its operating margin improved from 29% in 2001 to 31% in 2002, 38% in 2003 and 39% as of the first nine months of 2004. The company's debt to capitalization ratio fell from 63% in 2002, 60% in 2003 to 55% at the end of September 2004, yet this level is still high. TRIS Rating expects that this ratio will improve further because the huge capital expenditures to build a network that can ensure good service quality already occurred during 2001-2002. TAC's cash flow stream has improved but its funds from operations to total debt ratio has stayed low because of its high debt level. This cash flow protection is also expected to increase further resulting from both a lower level of total debt and increased internal cash generation, TRIS Rating daid. -- End
Total Access Communication PLC (TAC) Company Rating: Affirmed at A- Issue Ratings: TAC05OA: Bt6,000 million senior debentures due 2005 Affirmed at A- TAC064A: Bt15,000 million senior debentures due 2006 Affirmed at A- TAC089A: Bt3,000 million senior debentures due 2008 Affirmed at A- TAC089B: Bt2,500 million senior debentures due 2008 Affirmed at A- TAC09OA: Bt4,000 million senior debentures due 2009 Affirmed at A- TAC09OB: Bt1,000 million senior debentures due 2009 Affirmed at A- TAC109A: Bt3,500 million senior debentures due 2010 Affirmed at A- Rating Outlook: Positive from Stable