Leverage at Thailand-Based AIS Could Rise on Tribunal Order

          The legal claim relates to TOT's lost revenue arising from two amendments made to the concession agreement in 2001 and 2002. The claim could see AIS face higher regulatory risk and narrower rating headroom, although the payment order remains subject to the court's final decision. We estimate AIS's FFO adjusted net leverage could temporarily exceed the 2.0x threshold (2019F: 1.7x) above which we would consider negative rating action should the legal payment become immediately payable and be debt funded.

          However, we believe AIS has the flexibility to manage its leverage profile, including cutting back on investments or dividends. Our rating case assumes a 75% dividend payout ratio, in line with AIS's policy to pay at least 70% of consolidated net profit.

          Dividend contributions from AIS and Thailand's Intouch Holdings Public Company Limited, which has a 40.5% equity interest in AIS, accounted for 4%-5% of Singapore Telecommunications Limited's (Singtel, A+/Negative) adjusted EBITDA, including cash dividends received. We estimate a single-year dividend moratorium by AIS and Intouch would increase Singtel's net leverage by 0.1x-0.2x. Cash dividends from regional associates comprised 26% of Singtel group's adjusted EBITDA in the year ended March 2019, with 35%- owned Indonesian associate, PT Telekomunikasi Selular, contributing the bulk of the dividends.