AIS plans Bt7.5-bn bond issue

Advanced Info Service (AIS) plans to issue Bt7.5 billion in bonds early next year in a bid to raise working capital and reserves for future capital spending.

CEO Vikrom Sripratak said the bonds with two maturities - three-and-a-half and five years - would be sold to the general public and institutional investors.

Bangkok Bank, Kasikornbank, Krung Thai Bank, Siam Commercial Bank and TMB Bank will be the issue's underwriters. It will be part of a Bt10-billion amount approved by shareholders, which yesterday won a rating of "AA" with a "stable" outlook by Tris Rating.

The ratings are based on AIS's dominant position in the Thai cellular market due to its extensive subscriber base and well-recognised brand name. The ratings also take into consideration the company's capable and professional management team, 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 AIS will sustain its strong operating performance and continue to pursue a conservative financial policy. AIS is expected to maintain its revenue market share at about 50 per cent. In addition, any regulatory-policy changes are not expected to adversely impact the company's competitive advantages and financial performance," Tris said in a statement.

As of September, AIS had more than 27 million subscribers. The company's total revenue for the first nine months was Bt84.5 billion.

AIS's business profile is supported by a good track record by its management team in handling challenges from dynamic competitive landscape and technological advances. A combination of an experienced and capable management team and adequate funding sources has also enabled the company to provide high-quality services through extensive investments in mobile-network and internal-control systems. As well, a significant subscriber base underscores the company's strong brand name and efficient marketing efforts, Tris said.

Its strong financial profile is underpinned by a conservative financial policy and strong cash-flow generation. The company's debt-to-capitalisation ratio over the past three years ranged from 24-30 per cent. Economies of scale and effective cost-control initiatives have allowed the company to sustain relatively stable profitability margins for the last three years.

Although the competitive environment will continue to exert pressure on AIS's profitability and cash flows, Tris believes AIS's financial flexibility provides a sufficient cushion for future network investments. As a result of its dominant market position, strong financial profile and ample financial flexibility in funding new investments, AIS is expected to sustain its competitive advantage in the long term and expand its leading role in the Thai telecom industry.

Amid increasing economic stress and political uncertainty, Tris expects a possible contraction in AIS's profitability in the coming quarters. The profitability margin will be under pressure, although the extent of that is not expected to be substantial in view of the industry's relatively resilient nature to the economy.

As of the end of the year tomorrow, the mobile-phone penetration rate in Thailand is expected to approach 100 per cent. Uncertainties in several regulatory developments, particularly regarding concession amendments, remain one negative factor for all mobile operators.