Bangkok--13 Oct--Fitch Ratings
Fitch Ratings has today assigned Total Access Communication Public Company Limited (DTAC) a Long-term local currency Issuer Default Rating (IDR) at ‘BBB-’. At the same time, the agency has affirmed DTAC’s Long-term foreign currency IDR at ‘BBB-’, National Long-term rating at ‘A+(tha)’, senior unsecured debenture ratings at ‘A+(tha)’ and National Short-term rating at ‘F1(tha)’. The Outlook is Stable.
DTAC’s ratings reflect its strong financial profile and market position as Thailand’s second-largest cellular operator. DTAC continued to report strong cash flow generation with free cash flow of THB6.3bn in 2008 and THB9.7bn in H109. Adjusted net debt to last-12-month EBITDAR improved to 1.3x at end-2008, and further to 1.0x at end-H109 from 1.7x at end-2007.
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 National Telecommunication Commission since late 2006 has also helped improved the company’s competitive advantage given the reduction in regulatory-related costs.
Under Fitch’s parent-subsidiary methodology, the agency rates DTAC on a bottom-up basis, and assigns a one-notch uplift to reflect the moderate support linkage to its parent, Telenor ASA of Norway (‘BBB+’/Negative), which has an economic interest of 65.5% in DTAC.
Nonetheless, DTAC’s ratings are hampered by its high-level capital expenditure plan, particularly for the technology upgrade to 3G platforms, which could result in the company’s financial leverage increasing over the next three years. Other concerns include ongoing price competition in the cellular market and regulatory uncertainty.
The Stable Outlook reflects Fitch’s expectation that DTAC will continue to generate solid earnings, as well as maintain its market share and financial leverage consistent with its current credit metrics, despite its large network investment plan for the next two to three years. The ratings could be positively impacted by a sustainable improvement in non-voice revenues, EBITDAR margins and positive free cash flow generation, provided that the same are accompanied by a reduction in adjusted net debt and financial leverage. Conversely, the ratings could be negatively impacted by unfavourable changes in regulatory structure, a weaker linkage between the company and its parent, and a higher-than-expected investment spending that leads to a significant deterioration in financial leverage on a sustained basis.
Contacts: Obboon Thirachit, Bangkok, +662 655 4757; Pimrumpai Panyarachun, Bangkok, +662 655 4752; Matt Jamieson, Seoul, +822 3278 8355; 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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