TRIS Rating Co., Ltd. has affirmed the ratings of Advanced Info Service PLC (ADVANC) and its debentures at "AA" with "stable" outlook. The ratings are based on ADVANC's dominant market position as Thailand's leading mobile phone operator with an extensive customer base and strong cash generation ability even though its growth potential is quite limited in the intermediate term. The ratings also take into consideration ADVANC's capable and professional management team, its well-recognized brand name and its ability to control expenses. However, these strengths are partially restrained by continuing intense competition, which has resulted in all players introducing the aggressive tariff cutting schemes in 2005, and the inherent technological risk facing all operators.
The "stable" rating outlook is based on the expectation that ADVANC will be able to sustain its strong operating performance as the market leader and the experience of its management team. The outlook is also based on expectation that the company would maintain its conservative financial policy and new regulations introduced by the National Telecommunication Committee (NTC) would not require it to pay fees that are higher than the current rates.
TRIS Rating reported that while Thailand's total mobile subscriber bases rapidly expanded from 1999-2004, the growth showed signs of slowing down in 2005. Total mobile subscribers at the end of 2005 are estimated to be around 30.2 million, compared with 27 million at the end of 2004. Growth in 2005 was 12% compared with 22% in 2004. With a penetration rate of 48% at the end of 2005, there is still room for Thai mobile market to grow but it will be slower than during the previous five years.
ADVANC has maintained its leading position in the mobile phone industry in Thailand with approximately 54% market share (including subscribers of its subsidiary, Digital Phone Co., Ltd.). ADVANC's experienced and capable management team and sufficient funding sources have enabled it to extensively invest in a mobile phone network and internal systems to provide high quality services. The company will continue to benefit from its strong brand name, the highest network quality among all operators in Thailand, and efficient marketing efforts. ADVANC ended 2005 with 16 million subscribers, an increase of 8% over year-end 2004, while the subscriber base grew by approximately 12% industry-wide. Because the penetration for mobile phones in Thailand is approaching the saturation rate, ADVANC's management plans to enhance its revenue and profit in the future by increasing the revenue contribution from non-voice services. With its dominant market position, strong financial position, ample financial flexibility to fund new investments, and a very strong brand name, ADVANC should be able to maintain its leading position in the Thai mobile phone industry.
ADVANC has a strong financial profile supported by its conservative financial policy and consistently strong operating results. Its debt to capitalization ratio has continuously declined, from 50% at the end of 2002 to 30% at the end of September 2005. As it was able to benefit from economies of scale and the success of its cost control strategies, ADVANC maintained its operating margin before depreciation and amortization at high level at 53% during the first nine months of 2005. The ratio is unlikely to sustain so high as in 2005 in the future because of concession fee for post-paid subscribers which increased from 25% of revenue to 30% in October 2005 and the intensifying competitive environment. However, TRIS Rating expects that ADVANC will still deliver strong internal cash generation. Its annual funds from operation should be in the range of Bt35 billion-Bt40 billion during the next three years. -- End
Advanced Info Service PLC (ADVANC)
Company Rating: Affirmed at AA
Issue Ratings:
AIS063A: Bt12,000 million senior debentures due 2006 Affirmed at AA
AIS06NA: Bt10,000 million senior debentures due 2006 Affirmed at AA
AIS073A: Bt3,000 million senior debentures due 2007 Affirmed at AA
AIS07OA: Bt5,000 million senior debentures due 2007 Affirmed at AA
AIS093A: Bt2,500 million senior debentures due 2009 Affirmed at AA
AIS093B: Bt4,500 million senior debentures due 2009 Affirmed at AA
Rating Outlook: Stable
The "stable" rating outlook is based on the expectation that ADVANC will be able to sustain its strong operating performance as the market leader and the experience of its management team. The outlook is also based on expectation that the company would maintain its conservative financial policy and new regulations introduced by the National Telecommunication Committee (NTC) would not require it to pay fees that are higher than the current rates.
TRIS Rating reported that while Thailand's total mobile subscriber bases rapidly expanded from 1999-2004, the growth showed signs of slowing down in 2005. Total mobile subscribers at the end of 2005 are estimated to be around 30.2 million, compared with 27 million at the end of 2004. Growth in 2005 was 12% compared with 22% in 2004. With a penetration rate of 48% at the end of 2005, there is still room for Thai mobile market to grow but it will be slower than during the previous five years.
ADVANC has maintained its leading position in the mobile phone industry in Thailand with approximately 54% market share (including subscribers of its subsidiary, Digital Phone Co., Ltd.). ADVANC's experienced and capable management team and sufficient funding sources have enabled it to extensively invest in a mobile phone network and internal systems to provide high quality services. The company will continue to benefit from its strong brand name, the highest network quality among all operators in Thailand, and efficient marketing efforts. ADVANC ended 2005 with 16 million subscribers, an increase of 8% over year-end 2004, while the subscriber base grew by approximately 12% industry-wide. Because the penetration for mobile phones in Thailand is approaching the saturation rate, ADVANC's management plans to enhance its revenue and profit in the future by increasing the revenue contribution from non-voice services. With its dominant market position, strong financial position, ample financial flexibility to fund new investments, and a very strong brand name, ADVANC should be able to maintain its leading position in the Thai mobile phone industry.
ADVANC has a strong financial profile supported by its conservative financial policy and consistently strong operating results. Its debt to capitalization ratio has continuously declined, from 50% at the end of 2002 to 30% at the end of September 2005. As it was able to benefit from economies of scale and the success of its cost control strategies, ADVANC maintained its operating margin before depreciation and amortization at high level at 53% during the first nine months of 2005. The ratio is unlikely to sustain so high as in 2005 in the future because of concession fee for post-paid subscribers which increased from 25% of revenue to 30% in October 2005 and the intensifying competitive environment. However, TRIS Rating expects that ADVANC will still deliver strong internal cash generation. Its annual funds from operation should be in the range of Bt35 billion-Bt40 billion during the next three years. -- End
Advanced Info Service PLC (ADVANC)
Company Rating: Affirmed at AA
Issue Ratings:
AIS063A: Bt12,000 million senior debentures due 2006 Affirmed at AA
AIS06NA: Bt10,000 million senior debentures due 2006 Affirmed at AA
AIS073A: Bt3,000 million senior debentures due 2007 Affirmed at AA
AIS07OA: Bt5,000 million senior debentures due 2007 Affirmed at AA
AIS093A: Bt2,500 million senior debentures due 2009 Affirmed at AA
AIS093B: Bt4,500 million senior debentures due 2009 Affirmed at AA
Rating Outlook: Stable