Bangkok--11 Aug--Fitch Ratings
Fitch Ratings (Thailand) has today assigned Thailand-based Total Access Communication Public Company Limited’s (DTAC) new senior unsecured debentures with an issue size of up to THB2bn, and a maturity of up to seven years, a National Long-term rating of ‘A+(tha)’. The proceeds from the new debentures will be earmarked for working capital, refinancing and capex.
DTAC’s ratings reflect its strong brand name and market position as Thailand’s second-largest cellular operator. The company has improved its nationwide network coverage and defended its market share despite higher tariff competition over the past three years. In addition, the implementation of the Interconnection framework by the Thailand’s National Telecommunication Commission since late 2006 has also helped improve the company’s competitive advantage given the reduction in regulatory related costs.
The ratings also reflect DTAC’s strengthened financial profile and the moderate support linkage to its parent, Telenor of Norway (‘BBB+’/Negative), which has an economic interest of 65.5% in DTAC. Telenor’s support for its subsidiaries is generally determined on a case-by-case basis, and there is technically no legal recourse to Telenor. However, when taking into consideration the strategic and operational ties between Telenor and DTAC, Fitch believes that a moderate level of rating support linkage does exist, and accordingly factors in a one-notch uplift on DTACs ratings.
Although DTAC’s profitability and cash flow could experience mild pressure due to the economic slowdown in 2009, Fitch is of the opinion that the company still has the flexibility to reduce operating and marketing costs, as well as new investment expenditure if required. In H109, DTAC’s revenue and EBITDAR declined to THB32.3bn and THB10.1bn respectively from THB34.4bn and THB11.6bn in H108. Nonetheless, DTAC continued to report strong cash flow generation with free cash flows of THB10.5bn in H109. Adjusted net debt to EBITDAR leverage improved to 1.0x at end-H109 from 1.3x at end-2008.
DTAC’s ratings are constrained by its planned high level of capital expenditure particularly for the technology upgrade to 3G platforms which could weaken the company’s financial leverage over the next three years. DTAC plans to launch mobile services on a 2.1GHz based 3G platform, providing it obtains a license. Its present ratings thus take into consideration the likely license fee payment of USD150m-USD200m in 2009 or 2010 and network investment costs during 2010-2012. Other principal concerns include ongoing price competition in the cellular market and regulatory uncertainty.
Contacts: Obboon Thirachit, Bangkok, +662 655 4757; Pimrumpai Panyarachun, +662 655 4752; Vincent Milton, +662 655 4759.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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