TRIS Rating Co., Ltd. has affirmed the company rating of Advanced Info Service PLC (ADVANC) and the ratings of ADVANC’s senior debentures at “AA” with “stable” outlook. The ratings are based on ADVANC’s leading market position in the Thai cellular market, its extensive subscriber base, and strong brand equity. The ratings also take into consideration the company’s capable and professional management team as well as strong financial profile and cash generating capability. However, these strengths are partially constrained by competitive market environment, inherent technological risk, and uncertainties related to telecom regulations.
The “stable” outlook is based on the expectation that ADVANC will sustain its strong operating performance and continue to pursue a conservative financial policy. The company is expected to maintain its revenue market share at about 50%. To maintain the ratings, the company is also expected to balance the shareholder returns with the necessity to keep its balance sheet strong.
TRIS Rating reported that ADVANC’s business profile is very strong. The company holds approximately half of the industry’s market shares in terms of subscribers and revenues. By year end 2009, ADVANC had approximately 29 million subscribers and generated a total revenue of Bt102,452 million. The company’s business profile is supported by a good track record of its management team in handling challenges from dynamic competitive landscape and technological advances. A combination of experienced and capable management team and adequate funding sources has also enabled the company to provide high quality services through an extensive network infrastructure, particularly in rural areas, and control its costs effectively. Significant subscriber base underscores strong brand equity and effective business strategies.
TRIS Rating said that ADVANC’s strong financial profile is underpinned by a conservative financial policy and strong cash flow generation. Operating margins for the past three years were relatively stable, ranging between 40%-45%. The ratio is 15%-20% higher than industry peers. This is enabled by economies of scale and effective cost control initiatives. The company’s debt to capitalization ratio over the past three years ranged between 28%-34%. Although competitive environment should continue to exert pressure on ADVANC’s top line growth, TRIS Rating believes that the company’s financial flexibility provides a sufficient cushion for future network investments. Taking together a dominant market position, a healthy balance sheet, and a respectable financial flexibility, ADVANC is expected to sustain its competitive advantages and maintain its leading role in the Thai mobile phone industry in the medium term.
By year end 2009, mobile phone penetration rate in Thailand had reached 100%. The industry is expected to register a 3%-5% growth in 2010 on the back of expected economic recovery and strong growth in value-added services. Market competition should resume its intensity but in a rational manner. Heightened focus will be on the non-voice segment, driven by the popularity of smart phones and mobile-Internet. The auction for the new third-generation (3G) licenses is not likely to happen soon. Uncertainties in several regulatory developments, in particular with regard to concession amendments, remain a major negative factor for all mobile operators, said TRIS Rating. -- End
Company Rating: Affirmed at AA Issue Ratings: AIS119A: Bt4,000 million senior debentures due 2011 Affirmed at AA AIS127A: Bt5,000 million senior debentures due 2012 Affirmed at AA AIS134A: Bt4,000 million senior debentures due 2013 Affirmed at AA AIS139A: Bt4,000 million senior debentures due 2013 Affirmed at AA AIS141A: Bt2,500 million senior debentures due 2014 Affirmed at AA Rating Outlook: Stable
Copyright 2010, 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 is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.