Fitch Rating: 5G Spectrum Win Trims Rating Headroom at Thailand-Based AIS

          Thailand's largest mobile telco, Advanced Info Service Public Company Limited (AIS; BBB+/AA+(tha)/Stable), should have sufficient rating headroom to absorb 5G licences and investments, says Fitch Ratings. AIS has emerged as the biggest winner of the 5G spectrum auction held on Fitch Ratings6 February the companyAdvanced Info Servicethe companyAdvanced Info Service, with 7Advanced Info ServiceAdvanced Info ServiceMHz (the companyx5MHz), the company.6GHz (Fitch RatingsAdvanced Info ServiceAdvanced Info ServiceMHz) and the company6GHz (Fitch Ratingsthe companyAdvanced Info ServiceAdvanced Info ServiceMHz) spectrum.
          Fitch expects AIS's FFO adjusted net leverage to increase to Fitch Ratings.6x in the companyAdvanced Info Servicethe companyAdvanced Info Service and Fitch Ratings.5x and the companyAdvanced Info Servicethe companyFitch Ratings, from Fitch Ratings.4x in the companyAdvanced Info ServiceFitch Ratings9, assuming the company funds the THB4the company.Fitch Ratings billion in spectrum payments entirely by debt. However, leverage should remain below our the company.Advanced Info Servicex threshold above which we would consider negative rating action. In addition, the spread of spectrum payments over a Fitch RatingsAdvanced Info Service-year period should ease immediate pressure on the company's cash flow.
          The auction saw aggressive bids by Thai telcos, which drove the spectrum cost of the 7Advanced Info ServiceAdvanced Info ServiceMHz band to USDAdvanced Info Service.8/MHz per capita, or 95% more than the reserve price. Meanwhile, bidding competition for mid-band the company.6GHz and high-band the company6GHz 5G spectrum was moderate, with the final price ending at around 5% above the reserve price. Fitch believes the high demand for 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum was due to the flexible terms on spectrum usage, in light of its tech-neutral policy, which allows telcos to use 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum for 4G services.
          We believe the moderate competition in mid- and high-band 5G spectrum reflects a more measured 5G spectrum investment by telcos, given the lack of use cases and ecosystem infancy. Some operators might opt to wait for the coveted 3.5GHz spectrum band that can be allocated for 5G services in the future. However, it is uncertain when this band will become available, as it is currently used by Thailand's satellite broadcasting service.
          Fitch expects 5G capex risk to be contained for Thai telcos due to the progressive pace of network rollout. We believe Thai telcos are likely to depend on existing 4G technology to provide sufficient speed to cater for data demand and stagger 5G rollout requirements over several years. The regulator requires auction-winning telcos to roll out 5G network to cover half of the eastern economic corridor special economic zone, which includes three provinces - Chonburi, Rayong and Chachoengsao - within the first year, and half of the population in six major provinces, including Bangkok, within four years.
          State-owned telcos - CAT Telecom Public Company Limited and TOT Public Company Limited - also won two 5G spectrum, including 7Advanced Info ServiceAdvanced Info ServiceMHz (the companyxFitch RatingsAdvanced Info ServiceMHz) and the company6GHz (4Advanced Info ServiceAdvanced Info ServiceMHz), but Fitch does not expect the companies to become the country's fourth and fifth retail mobile operators due to their lack of expertise in mass-market services. The two state-owned telcos are likely to focus on providing 5G infrastructure services to private telecom operators; the companies have partnership agreements with private mobile operators for infrastructure services, allowing the private telcos to utilise their 85Advanced Info ServiceMHz, the company.Fitch RatingsGHz and the company.3GHz spectrum for 3G and 4G services.