TRIS Rating Co., Ltd. has upgraded the company and issue ratings of Total Access Communication PLC (TAC) to “A+” from “A” with “stable” outlook. The ratings reflect TAC’s competitive strength as the second largest cellular operator in Thailand and the ability of the management team to retain market share in an aggressively competitive environment. The ratings also take into consideration the company’s continually improving financial profile. These strengths are partially offset by an intense competition, large capital expenditure requirements in the medium term, and regulatory uncertainties.
The “stable” outlook is based on the expectation that TAC will continue to sustain its competitive position and will be able to generate sufficient FFO to expand the network without raising financial leverage dramatically. The outlook is also based on the expectation that any changes in the telecommunications regulations will not have a significant adverse impact on TAC’s operating and financial performance.
TRIS Rating reported that TAC generated Bt65.6 billion in revenue in 2007. As of June 2008, the company had a total of 17 million subscribers with around 30% market share. TAC’s underlying business strength is supported by proven track records in creating brand equity and sustaining market share. These successes reflect solid execution in a dynamic market. The company’s business strategies focus on the value-for-money concept. Several of its innovative calling packages have been well received by mobile users. The company benefits from the investment by Telenor ASA (Telenor), a leading Norwegian telecommunication company, in terms of managerial assistance. Representatives of Telenor hold TAC’s key management and board positions. TAC’s credit strength is further supported by an established subscriber base. The company’s network covers over 90% of the nation. In TRIS Rating’s view, the respectable market share enhances economies of scale and more leverage for introducing new services. The strong market position ensures a good level of sustainability for revenue and cash flow. TAC plans to provide third-generation (3G) services on the 850 MHz spectrum in the first half of 2009. Nationwide coverage for 3G is expected in three years. The expansion will cost about Bt5 billion.
TRIS Rating said, the mobile telephone industry in Thailand is an oligopoly and highly competitive. The penetration rate reached 90% by the first half of 2008. Price cutting, cheap SIMs, and upcountry expansion are the key drivers of subscriber growth. The voice service market appears to have reached the saturation point, while the prospects for non-voice services remain optimistic. In the medium term, the number of subscribers is expected to continue growing in the range of 8%-10% per annum, while market revenue will grow at 4%-6% per year. The non-voice market, accounting for 10% of total industry revenues, will play a more important role in the longer run. Telecom regulations remain a negative industry factor due to the unpredictable nature of the regulations and several pending court cases.
TAC’s financial profile is healthier, largely due to the replacement of access charge with interconnection charge (IC) payments. Earnings before interest, tax, depreciation and amortization (EBITDA) margin for the first half of 2008 stood at 32.3%. Meanwhile, EBITDA margins (without the IC) were 40.9%, compared with 41.8% in 2007 and 36.3% in 2006. The debt to capitalization ratio has gradually improved from over 50% before 2005 to 38.4% at the end of June 2008 and the funds from operations (FFO) to debt ratio has almost doubled from its 2004 level, driven mainly by healthier operating performance and a Bt3.1-billion equity injection from an initial public offering (IPO). The huge capital expenditures for the 3G network expansion are expected in the near term, and this will likely keep TAC from further de-leveraging its balance sheet, said TRIS Rating. -- End
Total Access Communication PLC (TAC)
Company Rating: Upgraded to A+ from A
Issue Ratings:
TAC098A: Bt3,000 million senior debentures due 2009 Upgraded to A+ from A
TAC09OA: Bt4,000 million senior debentures due 2009 Upgraded to A+ from A
TAC09OB: Bt1,000 million senior debentures due 2009 Upgraded to A+ from A
TAC109A: Bt3,500 million senior debentures due 2010 Upgraded to A+ from A
TAC118A: Bt3,000 million senior debentures due 2011 Upgraded to A+ from A
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating
The “stable” outlook is based on the expectation that TAC will continue to sustain its competitive position and will be able to generate sufficient FFO to expand the network without raising financial leverage dramatically. The outlook is also based on the expectation that any changes in the telecommunications regulations will not have a significant adverse impact on TAC’s operating and financial performance.
TRIS Rating reported that TAC generated Bt65.6 billion in revenue in 2007. As of June 2008, the company had a total of 17 million subscribers with around 30% market share. TAC’s underlying business strength is supported by proven track records in creating brand equity and sustaining market share. These successes reflect solid execution in a dynamic market. The company’s business strategies focus on the value-for-money concept. Several of its innovative calling packages have been well received by mobile users. The company benefits from the investment by Telenor ASA (Telenor), a leading Norwegian telecommunication company, in terms of managerial assistance. Representatives of Telenor hold TAC’s key management and board positions. TAC’s credit strength is further supported by an established subscriber base. The company’s network covers over 90% of the nation. In TRIS Rating’s view, the respectable market share enhances economies of scale and more leverage for introducing new services. The strong market position ensures a good level of sustainability for revenue and cash flow. TAC plans to provide third-generation (3G) services on the 850 MHz spectrum in the first half of 2009. Nationwide coverage for 3G is expected in three years. The expansion will cost about Bt5 billion.
TRIS Rating said, the mobile telephone industry in Thailand is an oligopoly and highly competitive. The penetration rate reached 90% by the first half of 2008. Price cutting, cheap SIMs, and upcountry expansion are the key drivers of subscriber growth. The voice service market appears to have reached the saturation point, while the prospects for non-voice services remain optimistic. In the medium term, the number of subscribers is expected to continue growing in the range of 8%-10% per annum, while market revenue will grow at 4%-6% per year. The non-voice market, accounting for 10% of total industry revenues, will play a more important role in the longer run. Telecom regulations remain a negative industry factor due to the unpredictable nature of the regulations and several pending court cases.
TAC’s financial profile is healthier, largely due to the replacement of access charge with interconnection charge (IC) payments. Earnings before interest, tax, depreciation and amortization (EBITDA) margin for the first half of 2008 stood at 32.3%. Meanwhile, EBITDA margins (without the IC) were 40.9%, compared with 41.8% in 2007 and 36.3% in 2006. The debt to capitalization ratio has gradually improved from over 50% before 2005 to 38.4% at the end of June 2008 and the funds from operations (FFO) to debt ratio has almost doubled from its 2004 level, driven mainly by healthier operating performance and a Bt3.1-billion equity injection from an initial public offering (IPO). The huge capital expenditures for the 3G network expansion are expected in the near term, and this will likely keep TAC from further de-leveraging its balance sheet, said TRIS Rating. -- End
Total Access Communication PLC (TAC)
Company Rating: Upgraded to A+ from A
Issue Ratings:
TAC098A: Bt3,000 million senior debentures due 2009 Upgraded to A+ from A
TAC09OA: Bt4,000 million senior debentures due 2009 Upgraded to A+ from A
TAC09OB: Bt1,000 million senior debentures due 2009 Upgraded to A+ from A
TAC109A: Bt3,500 million senior debentures due 2010 Upgraded to A+ from A
TAC118A: Bt3,000 million senior debentures due 2011 Upgraded to A+ from A
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating