BANGKOK--AUG 22--TRIS
THAI RATING AND INFORMATION SERVICES (TRIS) ANNOUNCED THURSDAY, 22
AUGUST 1996, A DOWNGRADED BBB RATING FOR THE INTERNATIONAL ENGINEERING PLC
(IEC)'S 1,200 MILLION BAHT CONVERTIBLE DEBENTURES. THE RATING WAS LOWERED
AND REMOVED FROM CREDITALERT, WHERE IT WAS PLACED ON 30 MAY 1996 AFTER THE
COMMUNICATIONS AUTHORITY OF THAILAND (CAT) AWARDED IEC A CELLULAR
CONCESSION. THE NEW RATING REFLECTS IEC'S LOWER-THAN EXPECTED CASH INFLOW
RESULTING IN A DISTRESSED FINANCIAL PROFILE WHICH IS EXPECTED TO CONTINUE
IN THE NEAR TERM DESPITE ITS RECAPITALIZATION PLAN. THE RATING WILL
LIKELY IMPROVE WITH IEC'S REORGANIZATION TO SET UP WIRELESS COMMUNICATIONS
SERVICE CO., LTD. (WCS) AS A CELLULAR OPERATOR, WHICH WILL ENHANCE IEC'S
FUTURE BUSINESS AND FINANCIAL PROFILES AS WELL AS ITS CONTINUING STRONG
MARKET POSITION DESPITE MORE INTENSIFIED COMPETITION.
IEC OWNS A 55% STAKE IN WCS WHICH LATER WILL BE DILUTED TO 35%.
UNDER THE NEW ARRANGEMENT, IEC WILL FOCUS ON TRADING CELLULAR HANDSETS AND
CUSTOMER SERVICES FOR THE MOBILE BUSINESS, LEAVING NETWORK OPERATIONS TO
WCS. IEC STANDS TO BENEFIT FROM THIS BECAUSE IT WILL SHARE A CERTAIN
PERCENTAGE OF AIRTIME REVENUE FROM WCS WITHOUT THE INVESTMENT BURDEN.
THIS EASES ITS FINANCIAL POSITION AND ENSURES ITS FUTURE EARNINGS. IN THE
LONG-TERM, IEC WILL BENEFIT FURTHER FROM WCS'S DIVEDENDS WHICH WILL BE A
PRINCIPAL SOURCE OF EARNINGS. BEFORE THIS NEW CONCESSION, IEC SUFFERED
FINANCIAL DIFFICULTY AS A SERVICE PROVIDER OF THE 1800 DIGITAL MOBILE
SYSTEM OF TOTAL ACCESS COMMUNICATION (TAC) IN WHICH IT SHARED 25% OF THE
INVESTMENT COST IN EXCHANGE FOR A 25% ALLOCATION OF TAC'S PHONE NUMBER
EXPANSION. AS A SERVICE PROVIDER FOR TAC, IEC OUTPERFORMED THE MARKET
WITH LOWER INVESTMENT COSTS PER SUBSCRIBER. HOWEVER, DUE TO A SLOWER-
THAN-EXPECTED DIGITAL MARKET, IEC SUFFERED A 170 MILLION BAHT LOSS.
NONETHELESS, THE MARKET FOR DIGITAL MOBILE PHONES APPEARS TO BE TAKING OFF
AND SHOULD EXPAND QUICKER WITH WCS AND DEMAND SHOULD BE AMPLE UNTIL THE
END OF THE DECADE. DESPITE INTENSE COMPETITION, TRIS CONSIDERS IEC
CAPABLE OF MAINTAINING ITS STRONG 2ND PLACE MARKET POSITION FROM ITS
DISTRIBUTION OF "NOKIA" WITH A 20% SHARE OF ANALOG AND 31% OF DIGITAL.
"MOTOROLA" IS THE MARKET LEADER WITH 32% OF BOTH SYSTEMS. IEC BENEFITS
FROM ITS LONG EXPERIENCE IN TRADING WITH STRONG DISTRIBUTION CHANNELS
THROUGHOUT THE COUNTRY.
IN 1995, ABOUT 67% OF IEC'S REVENUES CAME FROM HANDSET SALES, IN
WHICH MARGINS HAVE BEEN DECLINING. ANOTHER 9% OF REVENUES WERE FROM
CELLULAR SERVICES AND THE REMAINING FROM SALES OF OTHER TELECOM AND OFFICE
AUTOMATION EQUIPMENT WITH STRONG COMPETITION AND MARGINS UNDER PRESSURE.
IT IS EXPECTED THAT THE REVENUE CONTRIBUTION FROM AIRTIME WILL CONTRIBUTE
UP TO 50% BY THE YEAR 2000. RECENTLY, IEC'S FINANCIEL POSITION HAS BEEN
RESTRICTED BECAUSE OF HEAVY INVESTMENT IN VARIOUS PROJECTS AS WELL AS
WEAKENED OPERATION RESULTS. IN 1995, ITS CAPITAL STRUCTURE INCREASED TO A
HIGH LEVEL AT 60%. CASH FLOW TO TOTAL DEBT WAS UNDER 10% AND INTEREST
COVERAGE WAS MERELY 2.5 TIMES INDICATING A HIGH DEGREE OF FINANCIAL RISK.
IN THE SHORT RUN, IEC WILL REQUIRE SUBSTANTIAL CAPITAL FUNDS TO INVEST IN
WCS AND PAY REMUNERATION OF 2,250 MILLION BAHT. DESPITE ITS
RECAPITALIZATION PLAN, TRIS EXPECTS ITS FINANCIAL POSITION WILL CONTINUE
TO BE UNDER PRESSURE BUT WILL STRENGTHEN IN 1998 AND ONWARDS. END.
NOTE: THE INTERNATIONAL ENGINEERING PLC (IEC) TRIS'S RATINGS
SENIOR DEBT: 1,200 MILLION BAHT DOWNGRADED TO BBB FROM BBB+
CONVERTIBLE DEBENTURES
THAI RATING AND INFORMATION SERVICES (TRIS) ANNOUNCED THURSDAY, 22
AUGUST 1996, A DOWNGRADED BBB RATING FOR THE INTERNATIONAL ENGINEERING PLC
(IEC)'S 1,200 MILLION BAHT CONVERTIBLE DEBENTURES. THE RATING WAS LOWERED
AND REMOVED FROM CREDITALERT, WHERE IT WAS PLACED ON 30 MAY 1996 AFTER THE
COMMUNICATIONS AUTHORITY OF THAILAND (CAT) AWARDED IEC A CELLULAR
CONCESSION. THE NEW RATING REFLECTS IEC'S LOWER-THAN EXPECTED CASH INFLOW
RESULTING IN A DISTRESSED FINANCIAL PROFILE WHICH IS EXPECTED TO CONTINUE
IN THE NEAR TERM DESPITE ITS RECAPITALIZATION PLAN. THE RATING WILL
LIKELY IMPROVE WITH IEC'S REORGANIZATION TO SET UP WIRELESS COMMUNICATIONS
SERVICE CO., LTD. (WCS) AS A CELLULAR OPERATOR, WHICH WILL ENHANCE IEC'S
FUTURE BUSINESS AND FINANCIAL PROFILES AS WELL AS ITS CONTINUING STRONG
MARKET POSITION DESPITE MORE INTENSIFIED COMPETITION.
IEC OWNS A 55% STAKE IN WCS WHICH LATER WILL BE DILUTED TO 35%.
UNDER THE NEW ARRANGEMENT, IEC WILL FOCUS ON TRADING CELLULAR HANDSETS AND
CUSTOMER SERVICES FOR THE MOBILE BUSINESS, LEAVING NETWORK OPERATIONS TO
WCS. IEC STANDS TO BENEFIT FROM THIS BECAUSE IT WILL SHARE A CERTAIN
PERCENTAGE OF AIRTIME REVENUE FROM WCS WITHOUT THE INVESTMENT BURDEN.
THIS EASES ITS FINANCIAL POSITION AND ENSURES ITS FUTURE EARNINGS. IN THE
LONG-TERM, IEC WILL BENEFIT FURTHER FROM WCS'S DIVEDENDS WHICH WILL BE A
PRINCIPAL SOURCE OF EARNINGS. BEFORE THIS NEW CONCESSION, IEC SUFFERED
FINANCIAL DIFFICULTY AS A SERVICE PROVIDER OF THE 1800 DIGITAL MOBILE
SYSTEM OF TOTAL ACCESS COMMUNICATION (TAC) IN WHICH IT SHARED 25% OF THE
INVESTMENT COST IN EXCHANGE FOR A 25% ALLOCATION OF TAC'S PHONE NUMBER
EXPANSION. AS A SERVICE PROVIDER FOR TAC, IEC OUTPERFORMED THE MARKET
WITH LOWER INVESTMENT COSTS PER SUBSCRIBER. HOWEVER, DUE TO A SLOWER-
THAN-EXPECTED DIGITAL MARKET, IEC SUFFERED A 170 MILLION BAHT LOSS.
NONETHELESS, THE MARKET FOR DIGITAL MOBILE PHONES APPEARS TO BE TAKING OFF
AND SHOULD EXPAND QUICKER WITH WCS AND DEMAND SHOULD BE AMPLE UNTIL THE
END OF THE DECADE. DESPITE INTENSE COMPETITION, TRIS CONSIDERS IEC
CAPABLE OF MAINTAINING ITS STRONG 2ND PLACE MARKET POSITION FROM ITS
DISTRIBUTION OF "NOKIA" WITH A 20% SHARE OF ANALOG AND 31% OF DIGITAL.
"MOTOROLA" IS THE MARKET LEADER WITH 32% OF BOTH SYSTEMS. IEC BENEFITS
FROM ITS LONG EXPERIENCE IN TRADING WITH STRONG DISTRIBUTION CHANNELS
THROUGHOUT THE COUNTRY.
IN 1995, ABOUT 67% OF IEC'S REVENUES CAME FROM HANDSET SALES, IN
WHICH MARGINS HAVE BEEN DECLINING. ANOTHER 9% OF REVENUES WERE FROM
CELLULAR SERVICES AND THE REMAINING FROM SALES OF OTHER TELECOM AND OFFICE
AUTOMATION EQUIPMENT WITH STRONG COMPETITION AND MARGINS UNDER PRESSURE.
IT IS EXPECTED THAT THE REVENUE CONTRIBUTION FROM AIRTIME WILL CONTRIBUTE
UP TO 50% BY THE YEAR 2000. RECENTLY, IEC'S FINANCIEL POSITION HAS BEEN
RESTRICTED BECAUSE OF HEAVY INVESTMENT IN VARIOUS PROJECTS AS WELL AS
WEAKENED OPERATION RESULTS. IN 1995, ITS CAPITAL STRUCTURE INCREASED TO A
HIGH LEVEL AT 60%. CASH FLOW TO TOTAL DEBT WAS UNDER 10% AND INTEREST
COVERAGE WAS MERELY 2.5 TIMES INDICATING A HIGH DEGREE OF FINANCIAL RISK.
IN THE SHORT RUN, IEC WILL REQUIRE SUBSTANTIAL CAPITAL FUNDS TO INVEST IN
WCS AND PAY REMUNERATION OF 2,250 MILLION BAHT. DESPITE ITS
RECAPITALIZATION PLAN, TRIS EXPECTS ITS FINANCIAL POSITION WILL CONTINUE
TO BE UNDER PRESSURE BUT WILL STRENGTHEN IN 1998 AND ONWARDS. END.
NOTE: THE INTERNATIONAL ENGINEERING PLC (IEC) TRIS'S RATINGS
SENIOR DEBT: 1,200 MILLION BAHT DOWNGRADED TO BBB FROM BBB+
CONVERTIBLE DEBENTURES