Bangkok--3 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, with Stable Outlook.
The agency has also affirmed its National Long-Term Rating at ‘AA(tha)’ with Stable Outlook, National Short-Term Rating at ‘F1+(tha)’ and the National Long-Term rating on its senior unsecured debentures at ‘AA(tha)’.
The ratings reflect AIS’s strong market position as the largest mobile telecoms operator in Thailand. The company benefits from a competitive cost structure due to its large subscriber base, with a revenue market share of 53% in 2011. AIS’s market position is supported by its strong brand and extensive network coverage.
The ratings are also underpinned by AIS’s solid financial position. For 2011, AIS’s revenue and operating EBITDAR grew 13.6% and 9% yoy, respectively, supported by a strong growth in non-voice revenue which helped offset slower growth in the traditional voice segment. Financial leverage remained low, with funds flow from operations (FFO)-adjusted net leverage of 0.3x at end-2011.
Despite its large 3G investment for the next three years, AIS should continue to generate solid operating cash flow and maintain low financial leverage in the medium term. Fitch believes that AIS’s current low financial leverage should provide flexibility to absorb the new investment.
Key credit risks are uncertainty over regulatory, policy and legal issues. These include the pending review of concession amendments, tighter restrictions on foreign ownership and 2G concession expiry. Furthermore, an increase in competition in the cellular market could affect margins.
AIS’s ratings could benefit from a favourable resolution of regulatory issues and from diversification to other telecom businesses. Conversely, the ratings could come under downward pressure from unfavourable regulatory changes or from an increase in FFO-adjusted net leverage above 1.5x on a sustained basis. A downgrade of Fitch’s ‘BBB+’ Country Ceiling for Thailand would also lead to a downgrade in AIS’s Long-Term Foreign-Currency IDR.