TRIS Rating Co., Ltd. has assigned a “AA” rating for the proposed up to Bt5,000 million senior debentures of Advanced Info Service PLC (ADVANC). At the same time, TRIS Rating has affirmed the current ratings of ADVANC and its debentures at “AA”. The outlook remains “stable”. The ratings are based on ADVANC’s dominant position in the Thai cellular market due to its extensive subscriber base and well-recognized brand name. The ratings also take into consideration the company’s capable and professional management team, its strong financial profile, and strong cash generating capability. However, these strengths are partially constrained by the continuation of intense competition among the three major mobile operators, inherent technological risk, and uncertainties related to telecom regulations. The “stable” rating outlook is based on the expectation that ADVANC will sustain its strong operating performance and continue to pursue a conservative financial policy. ADVANC is expected to maintain its revenue market share at about 50%. In addition, any regulatory policy changes are not expected to adversely impact the company’s competitive advantages and financial performance. TRIS Rating reported that during the period 1999-2004, the number of mobile phone subscribers in Thailand expanded rapidly at an average growth rate of 60% per annum. Subscriber growth afterward remained solid but slowed to 12% and 33% in 2005 and 2006, respectively, driven by heavy competition in SIM-card distribution, price cutting, and upcountry expansion. By the end of 2007, mobile phone penetration rate was slightly above 80%. The industry recorded approximately 32% of subscriber growth from 2006, while the industry revenue, excluding Interconnection Charge (IC) grew only 4% due to fierce tariff competition and lower usage from new subscribers. Regulatory concerns, in particular with regard to the Council of State’s ruling on the incorrect procedures in concession amendments and the dispute over IC, remain one of the biggest pressures on credit profile of mobile operators. TRIS Rating said, ADVANC continues to maintain its leadership position in the mobile industry, claiming about half of the market shares by both subscriber base and overall revenues. By year end 2007, the company had 24.1 million subscribers, a 23% rise from 2006, with total revenues of Bt108.5 billion, including a Bt16.5 billion revenue from IC. A combination of ADVANC’s experienced and capable management team and adequate funding sources has enabled the company to provide high quality services through extensive investments in the mobile phone network and its own internal systems. The company will continue to benefit from its strong brand name, ubiquitous and high quality network, and efficient marketing efforts. As a result of its dominant market position, strong financial profile, and ample financial flexibility to fund new investments, ADVANC should be able to maintain its leading position in the Thai mobile phone industry. ADVANC’s management team has a good track record of dealing with the twin challenges of changing competitive environment and the advent of new technologies. The company has successfully implemented various strategies to create long-term competitive advantages. Because the penetration rate of mobile phones in Thailand is approaching the saturation point, ADVANC plans to enhance its revenue and profit by increasing the revenue contribution from non-voice services. ADVANC’s strong financial profile is underpinned by a conservative financial policy and strong cash flow generation. The company’s debt to capitalization ratio over the past three years ranged between 24%-30%. Economies of scale and effective cost control initiatives have allowed the company to keep operating margins before depreciation and amortization (excluding IC) above 45% for the last three years. Although the competitive environment is likely to challenge ADVANC’s profitability and cash flows, TRIS Rating believes that ADVANC’s financial flexibility provides a sufficient cushion for network investments. ADVANC plans to use proceeds from the new issued debentures to pay the amortized debentures expected to due in the next few months, to replace short-term financings that the company already repaid in the early 2008, and to finance future network expansion. Total outstanding debts are not expected to materially change as a result of this new bond issue. -- EndAdvanced Info Service PLC (ADVANC) Company Rating: Affirmed at AAIssue Ratings:AIS093A: Bt2,500 million senior debentures due 2009 Affirmed at AAAIS093B: Bt4,500 million senior debentures due 2009 Affirmed at AAAIS099A: Bt3,427.1 million senior debentures due 2009 Affirmed at AAAIS119A: Bt4,000 million senior debentures due 2011 Affirmed at AAAIS139A: Bt4,000 million senior debentures due 2013 Affirmed at AAUp to Bt5,000 million senior debentures due 2013 AARating Outlook: Stable StableRating Outlook: Stable -------------------------------------------------------Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. 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