Bangkok--15 Aug--PR Solution
Rapid recovery expected from Q2 price competition
True Move subscriber growth remains strong
Consumer broadband revenue up 67% Y-on-Y
Sevenfold increase in UBC net adds
Equity placement and UBC long-term financing complete
Convergence lifestyle strategy taking shape
True Corporation PLC (SET: TRUE) expects to recover quickly from a second quarter affected by cellular price competition, and to make further significant progress on its convergence lifestyle strategy.
True CEO and President Supachai Chearavanont says that unlike during last year’s price competition, True Move’s offers through Q206 were mainly for a short time and for new customers only.
“We have also seen tariffs increase after indications that interconnection fees would be set at levels higher than some of the prices being offered during the quarter.
“Our convergence lifestyle strategy is taking shape, combining services within True Group to fulfill the lifestyle needs of Thai consumers. Longer-term, we believe there will be less churn among True Group customers, and in particular True Move customers, as sales of bundled True Group services grow. This will reduce our customers’ price sensitivity and lessen the impact of any future price competition.”
Consolidated service revenue for the three months to June 30, 2006 of Bt 12.0 bn was 7.1% lower than in Q106 but 17.3% higher than in Q205. The Y-on-Y increase reflected the full consolidation of pay-TV operator UBC early in the year and strong growth in consumer broadband. EBITDA was down 16.4% Q-on-Q but up 7.1% Y-on-Y. EBITDA margin fell Q-on-Q from 35.7% to 32.4%, and was also slightly lower Y-on-Y.
Group net loss for Q206 was Bt 1.5 bn, compared with a net loss of Bt 964 mn in Q205, and a net profit of Bt 498 mn in Q106, which included a foreign exchange gain of Bt 1.3 bn. The greater loss Y-on-Y was mainly due to price competition and the costs of the UBC transaction, mostly non-cash items.
Comparing the first half of 2006 to the first half of 2005, consolidated service revenue and EBITDA were significantly higher (up 18.1% and 8.4% respectively) after the consolidation of UBC and strong growth from consumer broadband. EBITDA margin fell from 35.0% to 34.1%, due mainly to a greater contribution from lower-margin businesses (including UBC and True Move) and a decline in wireline and True Move margins.
True Move added a net 506,000 subscribers in Q206 to reach 5.4 million in total, and is likely to meet its target of 5.7 million subscribers before year-end. Total market share rose from 15.1% to 16.2% during 1H06. Service revenue, however, fell 10.6% Q-on-Q to Bt 5.0 bn, EBITDA was 34.4% lower and EBITDA margin fell from 23.5% to 17.9%.
Year-on-year, service revenue rose 3.5%, EBITDA fell 3.7% (due mainly to higher network operating expenses associated with network expansion) and EBITDA margin was slightly higher.
Consumer broadband continued its strong growth. Service revenue of Bt 753 mn was 9.6% higher Q-on-Q and 67.3% higher Y-on-Y. Net subscriber additions were stable Q-on-Q at 34,000, taking the total to 369,000.
This helped True’s wireline business lift service revenue by 2.3% Y-on-Y to Bt 5.9 bn. Quarter-on-quarter, however, wireline service revenue was down 4.7%, EBITDA down 8.6% and EBITDA margin fell from 45.2% to 43.4%.
UBC service revenue increased 2.6% Q-on-Q to Bt 2.1 bn with 15,000 net subscriber additions, compared with 2,200 in Q106. This sevenfold increase was due mainly to its mass market campaign launched on April 1. Total subscribers reached 501,000. EBITDA of Bt 525 mn and EBITDA margin (24.2%) were down slightly due to higher marketing costs from the new campaign.
Chief Financial Officer Mr William Harris said True’s balance sheet continued to strengthen. The consolidated net debt to EBITDA ratio for 1H06 reduced further to 4.7 times.
In July a Bt 3.4 bn private placement of True shares, undertaken mainly to fund True Move’s growth, helped resolve any concerns over True’s equity levels. The long-term financing of the UBC acquisition was also completed. Wireline’s debt fell by Bt 5.3 bn during first seven months of 2006, partly funded by UBC long-term debt.