TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Total Access Communication PLC (TAC) at “A+” with “stable” outlook. The ratings reflect the strong competitive position of TAC as the second largest mobile operator in Thailand, an experienced and capable management team, extensive network coverage, and strong balance sheet with falling debt levels. These strengths are partially offset by a competitive environment, large capital expenditure requirements in the medium term, and the uncertainty of telecom regulations.
The “stable” outlook is based on the expectation that TAC will sustain its competitive position and maintain a strong financial profile. The outlook is also based on the expectation that any changes in the telecommunications regulations will not have a significant adverse impact on operating performance and financial status.
TRIS Rating reported that TAC had a total of 19 million subscribers with around 30% market share, generating Bt32.5 billion of total service revenues for the first six months of 2009. TAC’s underlying business strength is supported by proven track records in creating brand equity and sustaining strong market share. A strong market position ensures sustainability of revenue and cash flow. These successes reflect solid execution in a dynamic market. The company benefits from the managerial assistance of Telenor ASA (Telenor), a leading Norwegian telecommunication company. Representatives of Telenor hold various positions of key management and board of director in TAC. TAC’s credit strength is further supported by an established subscriber base. The company’s digital network covers nearby 100% of the nation.
For the first six months of 2009, TAC’s service revenues, excluding the interconnection charges (IC), declined by 2.1% from the same period last year due to the slowdown in the economy and lower international roaming (IR) service revenues. The earnings before interest, tax, depreciation and amortization (EBITDA) margin for the first half of 2009 stood at 29.7%. Over the past few years, the EBITDA margin was relatively stable, ranging between 29%-32%. Even though the economic contraction cuts revenue, TAC’s liquidity profile and cash flow remain strong. The improving financial profile is underpinned by a gradual reduction in debt levels. The debt to capitalization ratio has gradually fallen from over 50% before 2005 to 32% in 2008, and 31% at the end of June 2009. The funds from operations (FFO) to total debt ratio in 2008 doubled from the 2006 level and stood at 30.8% (non-annualized) for the first half of 2009. The rise was driven mainly by both healthier operating performance and debt reduction. Huge capital expenditures for the 3G network expansion are expected in the near term, and will likely keep TAC from further de-leveraging the balance sheet.
TRIS Rating said, the mobile telephone industry in Thailand is an oligopoly and competitive. After impressive growth of around 120% per annum during 2001 and 2002, the growth rate of new mobile subscribers slowed down substantially to only at an average of 18% per annum from 2004 through 2008. The penetration rate reached nearby 100% by the first half of 2009. Promotions in SIM card distribution and upcountry expansion, particularly in the prepaid segment, are the key drivers of subscriber growth. The industry pricing has been more rational and stable after the implementation of the IC. The voice service market appears to have reached the saturation point. The slow growth in voice service will be partially offset by the favourable prospects for non-voice services. The non-voice revenues, currently accounting for 15% of total industry revenues in 2008, will play a more crucial role in the long run. Telecom regulations remain a negative industry factor due to the unpredictable direction of the regulations and several pending court cases. -- End
Company Rating: Affirmed at A+ Issue Rating: 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+ TAC118A: Bt3,000 million senior debentures due 2011 Affirmed at A+ Rating Outlook: Stable
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