Bangkok--18 Jul--Fitch Ratings
Fitch Ratings has today assigned a National Long-term debt rating of ‘A(tha)’ to Thailand-based Total Access Communication Plc’s (“DTAC”) up to THB6 billion in new senior unsecured debentures. At the same time, the agency affirmed DTAC’s Long-term foreign currency Issuer Default Rating (“IDR”) at ‘BB+’ and National Long-term rating at ‘A(tha)’. The Outlook on the ratings is Stable. The company’s National Short-term rating was also affirmed at ‘F1(tha)’. The new debentures will be used to fund DTAC’s working capital and investment requirements as well as to refinance its maturing debt.
The ratings reflect DTAC’s strong market position, its relatively solid financial position and the high level of commitment from Telenor ASA of Norway (“Telenor”). The latter is expected to result in an improvement in DTAC’s financial flexibility and maintenance of a more conservative financial profile. As a result of an aggressive marketing campaign, DTAC was able to report record high net new subscribers of 1.15 million in Q106 (representing 60% market share of total net new subscribers). Although the largest operator, Advanced Info Service Plc, has stepped up its promotional activities since March 2006, Fitch views that DTAC should be able to defend its 30% market share in cumulative subscriber base thanks to its continued active marketing drive and expansion in network coverage.
The ratings also take into account that the competition in Thailand’s cellular market will remain intense with operators fighting for new subscribers in order to be prepared for the introduction of an interconnection regime, expected in early 2007. This is likely to result in a continued high network investments by operators. Other credit concerns include DTAC’s higher regulatory cost structure and uncertainties over the regulatory environment of Thailand’s telecoms industry, particularly the recent draft regulation on foreign domination.
DTAC reported a relatively flat EBITDA of THB4.3bn in Q106 as compared to the previous quarter. While its service revenues increased by 6% quarter on quarter to THB11.8bn, this was offset by higher sales and marketing expenses resulting from stepped-up marketing activity as well as an increase in regulatory costs. The strong cash flow from operating activities plus moderate capex during the quarter led to a quarter on quarter decline in its net debt level to THB35.9bn at end-March 2006, translating into net debt to last-12-month EBITDA of 2.2x. Although DTAC’s debt level is likely to increase for the remaining of the year as the company keeps investing to improve its network, DTAC’s continued strong operating performance should keep its net debt to EBITDA ratio at a moderate level of around 2.0x to 2.5x during 2006/2007.
DTAC is the second-largest cellular operator in Thailand with an approximately 30% market share and strong brand recognition. With Telenor’s recent purchase of a 39.9% interest in United Communication Industry Plc. (“UCOM”) and its subsequent tender offers for UCOM and DTAC shares, Telenor lifted its aggregate economic interest in DTAC to 70.2% from 40.3%. DTAC is Telenor’s largest acquisition in Asia and it ranks second in terms of EBITDA contribution outside Norway.
Contact: Orawan Karoonkornsakul, Soamsiri Chadavadh, Vincent Milton; Bangkok, Tel: +662 655 4755.