Bangkok--11 Oct--Moody's Investors
Moody's Investors Service says in a new report that a recent court ruling in Thailand will hurt the country's telecom industry and infrastructure overall, although one company -- True Move -- may benefit in the short term.
On September 23, Thailand's supreme administrative court upheld a lower court's injunction against the auctioning of 3G mobile licenses.
The hold-up in long-overdue enhancements to the country's telephone network reveals the costs of regulatory uncertainty following Thailand's four years of political instability -- and a country that already lagged its regional peers on its deployment of advanced telecoms will now slip even further behind.
"The ruling will only lead to a further, if not an intensified, lack of clarity in the regulatory environment and create difficulties for operators and investors alike," writes Laura Acres, a Moody's VP and Senior Credit Officer, in a new Special Comment, "Thai Telcos: So What Now?"
"This could delay auctions for several years -- by which time the technology will be pretty much obsolete, as 4G communications become the norm."
"And, at this point, we doubt that Thailand's 3G auctions will resume any time soon -- at least, not until a new regulator, the National Broadcasting and Telecommunications Commission, is established."
According to the high court, the current regulator, the National Telecommunications Commission, lacks the authority to issue new licenses, which would cut by up to 75% the fees paid to state-run telecom incumbents, the Telephone Organization of Thailand (TOT) and the Communications Authority of Thailand (CAT), by the country's three mobile operators, Advanced Info Services (AIS, unrated), Total Access Communications (DTAC, unrated), and True Move (B2, negative) under their current concessions.
The delay could benefit True Move, the weakest of Thailand's three cellular operators, because it no longer has to come up with the USD430 million it needs to pay for the 3G license fee or the associated capital expenditures to roll out its 3G network.
"Raising this amount of funds would have required refinancing of all of True Move's existing debt to get around the incurrence tests on its outstanding bonds and the maintenance tests on its loans," writes Acres.
Now, True Move can continue operating with its current capital structure and focus on deleveraging with the revenues it can generate as a result of its long-term convergence strategy.
However, the company and its competitors will still have to continue providing services under their current concession arrangements, sharing 20-30% of their revenues with CAT and TOT rather than the much lower annual fee of 6% of revenues in return for a 3G license.
"This means that True Move -- whose concession will be the first to expire in 2013 -- has got to secure an extension, and do so soon.
Otherwise, it's going to face significant refinancing risk given that its bonds mature in 2013 and 2014," Acres goes on to say.
The report can be accessed at www.moodys.com.
Hong Kong
Laura Acres
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077