Bangkok--24 Sep--Fitch Ratings
Fitch Ratings has today said in a special report that it does not anticipate any substantial impact on the credit quality of Thailand's mobile phone operators from the upcoming 3G licence spectrum auction in the 2.1 gigahertz band. Fitch rates Advanced Info Service Public Company Limited (AIS, 'BBB+'/Stable) and Total Access Communication Public Company Limited (DTAC, 'BBB-'/Stable).
Although the expected high upfront licence fee and investment required to offer 3G services could result in an increase in net debt and financial leverage during the next two to three years, these companies' solid cash flow generation and strong financial positions should help them withstand potential additional costs. The agency also notes that despite the high capex - the key benefit of the 3G licence is lower regulatory costs - which should boost the operators' profit margin over the medium-to-long-term.
The agency notes that the licensing should also help pave the way towards industry restructuring and create a more level playing-field among telecom operators - given the unified terms and conditions under the new licence scheme. The migration to the 3G platform should trigger the concession negotiation process with AIS' and DTAC's concessionaires, TOT Public Company Limited and CAT Telecom Public Company Limited respectively, which could lead to changes in operating terms and conditions of the 2G concessions to bring them more in line with the new 3G licence scheme.
The report also notes that the additional spectrum should help introduce addition revenue streams, particularly non-voice services including mobile internet, content download and broadband wireless access. The potential growth in non-voice revenue should help offset the drop in traditional average revenue per user caused by intense competition. On the other hand, the agency notes that 3G licencing could lead to the entry of new players, creating greater market competition which could affect the profitability of existing operators.
"3G Licences in Thailand: No Significant Credit Impact, Despite Increase in Capex" is available at www.fitchratings.com.
Contacts: Obboon Thirachit, Bangkok, +662 655 4757; Pimrumpai Panyarachun, Bangkok, +662 655 4752; Matt Jamieson, Seoul, +822 3278 8355; Vincent Milton, Bangkok, +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.
Media Relations: Shivani Sundralingam, Singapore, Tel: + 65 6796 7215, Email: [email protected].