กรุงเทพฯ--18 พ.ย.--Fitch Ratings
Fitch Ratings has affirmed Thailand-based telecom company Total Access Communication Public Company Limited's (DTAC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB' respectively. The Outlook is Stable. A full rating breakdown is provided below.
The ratings reflect DTAC's position as Thailand's second-largest cellular operator with 30% subscriber market share at end-9M11. The company has improved its nationwide network coverage and defended its market share despite intense competition over the past three years.
The ratings are also underpinned by DTAC's strong financial position. For 9M11, DTAC's revenue and operating EBITDAR grew 10.8% and 13.2% yoy, respectively, supported by strong growth in non-voice revenue which helped offset a slowdown in the traditional voice segment. With strong cash flow generation, DTAC's funds from operations (FFO)-adjusted net leverage improved to net cash position at end-9M11 from 0.3x at end-2010. However, Fitch expects FFO-adjusted net leverage to revert to 0.3x at end-2011, following payment of a revenue-sharing fee in Q411.
Notwithstanding its large 3G investment, DTAC should continue to generate strong operational cash flow and maintain low financial leverage in the medium term. While increases in capex to roll-out the 3G network could weaken DTAC's financial leverage initially, Fitch believes that significant rating headroom provides the company with flexibility to undertake the new investment without impairing its 'BBB' ratings.
Under its parent and subsidiary rating linkage methodology, Fitch rates DTAC on a bottom-up basis, with a one-notch uplift to reflect implied support from its parent, Telenor, which has a 65.5% economic interest in DTAC and strong board and management control.
Key credit risks are uncertainty over regulatory, policy and legal issues. These include the pending review of concession amendments and tighter restrictions on foreign ownership laws. Furthermore, increase in competition in the cellular market could affect margins.
The ratings may benefit from favourable resolution of regulatory issues, sustainable improvement in non-voice revenues to over 25% of service revenues from 16.4% in 9M11 and/or an increase in scale and revenue market share closer to that of the leading operator, Advanced Info Service Public Company Limited ('BBB+'/Stable). This is provided that DTAC is able to maintain FFO-adjusted net leverage below 1.0x notwithstanding additional spending requirements for 3G. Conversely, the ratings may be negatively affected by unfavorable changes in regulatory structure, weaker linkage between the company and its parent, higher-than-expected investment spending and/or dividend payouts leading to significant deterioration in FFO- adjusted net leverage to over 1.5x on a sustained basis.
DTAC's ratings
Long-Term Foreign and Local Currency IDR affirmed at 'BBB'; Outlook Stable
National Long-Term rating affirmed at 'AA-(tha)', Outlook Stable
National Short-Term rating affirmed at 'F1+(tha)'
Senior unsecured debentures affirmed at 'AA-(tha)'