Bangkok--13 May--Fitch Ratings
Fitch Ratings has affirmed Thailand-based telecom company Advanced Info Service Public Company Limited’s (AIS) Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at ‘BBB+’ respectively, its National Long-term rating at ‘AA(tha)’, and National Short-term rating at ‘F1+(tha)’. The Outlook is Stable.
The ratings reflect AIS’s strong market position as Thailand’s largest mobile operator with a revenue market share of 52% in 2010 and a competitive cost structure. This is supported by its strong branding and extensive network coverage.
The ratings are also underpinned by AIS’s solid financial position. Despite a slowdown in the voice segment, AIS continued to report a 7.9% year-on-year growth in service revenue in 2010. This was due to strong growth in the non-voice segment which helped offset the slowdown in traditional voice revenue. Despite a high dividend payout in 2010, AIS’s financial leverage remained low with funds from operations (FFO) adjusted net leverage of 0.6x at end-2010.
The Stable Outlook reflects Fitch’s expectations that, despite its large 3G investment, AIS should continue to generate solid operating cash flow and maintain low financial leverage in the medium term. While a surge in capex to roll out the 3G network could weaken AIS’s financial leverage during the initial network rollout phase, the agency believes that AIS’s current low level of financial leverage should provide flexibility to absorb the new investment.
Key credit concerns include uncertainty over regulatory, policy and legal issues. These include the pending review of concession amendments, tighter restrictions on foreign ownership, and 2G concession conversions. Furthermore, an increase in competition in the cellular market could affect margins.
The ratings could be positively impacted by sustainable improvement in non-voice revenue to over THB20bn, accompanied by a favourable resolution of regulatory issues and FFO adjusted net leverage remaining below 1.5x, notwithstanding additional 3G capex.
Conversely, the ratings could be negatively affected by unfavourable changes to the regulatory structure, an increase in FFO adjusted net leverage above 1.5x on a sustained basis, and a downgrade of Fitch’s ‘BBB+’ Country Ceiling for Thailand.
Contacts:
Primary Analyst
Obboon Thirachit
Associate Director
+662 655 4757
Fitch Ratings (Thailand) Limited
Wave Place 13th Floor
Wireless Road, Lumpini, Patumwan
Bangkok 10330
Secondary Analyst
Pimrumpai Panyarachun
Associate Director
+662 655 4752
Committee Chairperson
Matt Jamieson
Senior Director
+822 3278 8355