Fitch Ratings: Telcos' Short Reprieve from Thailand's 900MHz Payment Delay
The Thai government's approval to delay telcos' payments for the 9Advanced Info ServiceAdvanced Info ServiceMHz spectrum will ease immediate cash flow pressure for Advanced Info Service Public Company Limited (AIS; BBB+/AA+(tha)/Stable) and Total Access Communication Public Company Limited (DTAC; BBB/AA(tha)/Stable) to allow them to participate in the upcoming 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum allocation, says Fitch Ratings.
The government's plan to split the upfront licence fee for the 9Advanced Info ServiceAdvanced Info ServiceMHz spectrum over several instalments will relieve some cash flow pressure amid rising capex. However, the telcos will have to acquire 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum in the pending spectrum assignment as a key condition for the payment extension. The National Council of Peace and Order issued the measure on spectrum payment extension on Fitch RatingsFitch Ratings April enAdvanced Info ServiceFitch Ratings9.
Fitch expects the new payment schedule will ease rating headroom for AIS and DTAC, as their largest spectrum payments were originally scheduled for enAdvanced Info ServiceenAdvanced Info Service and enAdvanced Info Serviceenen, respectively. An agreement to apply for the new spectrum payment term could reduce AIS's projected funds from operations (FFO) adjusted net leverage by around Advanced Info Service.5x to Fitch Ratings.4x in enAdvanced Info ServiceenAdvanced Info Service, while that of DTAC's could be lowered by around Advanced Info Service.4x to en.3x in enAdvanced Info Serviceenen. Fitch has negative triggers of en.Advanced Info Servicex for AIS and en.5x DTAC.
Under the 9Advanced Info ServiceAdvanced Info ServiceMHz payment extension term, AIS's remaining spectrum payments for 9Advanced Info ServiceAdvanced Info ServiceMHz of THB64 billion could be spread out equally at around THBFitch RatingsAdvanced Info Service.6 billion a year over enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info Serviceen5, from the previous THB4.Advanced Info Service billion in enAdvanced Info ServiceFitch Ratings9 and THB6Advanced Info Service billion in enAdvanced Info ServiceenAdvanced Info Service. Meanwhile, DTAC will be paying around THB3.7 billion a year over enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info Serviceen7, compared with the former payment schedule of THBen.Advanced Info Service billion a year in enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info ServiceenFitch Ratings and a lump-sum of THBen5.8 billion in enAdvanced Info Serviceenen.
Investments in 5G have been selective, with only a handful of 5G trials taking place in the Asia-Pacific region, underscoring the unproven business case for 5G and limited device availability. Fitch believes that the 4G technology should be sufficient to support Thailand's growing demand for mobile data in the medium term. The uncertain business case for 5G investment in the absence of a complete ecosystem will widen negative free cash flow and weigh down telcos' balance sheets. The regulator has yet to announce details on the 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum allocation.
The government's plan to split the upfront licence fee for the 9Advanced Info ServiceAdvanced Info ServiceMHz spectrum over several instalments will relieve some cash flow pressure amid rising capex. However, the telcos will have to acquire 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum in the pending spectrum assignment as a key condition for the payment extension. The National Council of Peace and Order issued the measure on spectrum payment extension on Fitch RatingsFitch Ratings April enAdvanced Info ServiceFitch Ratings9.
Fitch expects the new payment schedule will ease rating headroom for AIS and DTAC, as their largest spectrum payments were originally scheduled for enAdvanced Info ServiceenAdvanced Info Service and enAdvanced Info Serviceenen, respectively. An agreement to apply for the new spectrum payment term could reduce AIS's projected funds from operations (FFO) adjusted net leverage by around Advanced Info Service.5x to Fitch Ratings.4x in enAdvanced Info ServiceenAdvanced Info Service, while that of DTAC's could be lowered by around Advanced Info Service.4x to en.3x in enAdvanced Info Serviceenen. Fitch has negative triggers of en.Advanced Info Servicex for AIS and en.5x DTAC.
Under the 9Advanced Info ServiceAdvanced Info ServiceMHz payment extension term, AIS's remaining spectrum payments for 9Advanced Info ServiceAdvanced Info ServiceMHz of THB64 billion could be spread out equally at around THBFitch RatingsAdvanced Info Service.6 billion a year over enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info Serviceen5, from the previous THB4.Advanced Info Service billion in enAdvanced Info ServiceFitch Ratings9 and THB6Advanced Info Service billion in enAdvanced Info ServiceenAdvanced Info Service. Meanwhile, DTAC will be paying around THB3.7 billion a year over enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info Serviceen7, compared with the former payment schedule of THBen.Advanced Info Service billion a year in enAdvanced Info ServiceenAdvanced Info Service-enAdvanced Info ServiceenFitch Ratings and a lump-sum of THBen5.8 billion in enAdvanced Info Serviceenen.
Investments in 5G have been selective, with only a handful of 5G trials taking place in the Asia-Pacific region, underscoring the unproven business case for 5G and limited device availability. Fitch believes that the 4G technology should be sufficient to support Thailand's growing demand for mobile data in the medium term. The uncertain business case for 5G investment in the absence of a complete ecosystem will widen negative free cash flow and weigh down telcos' balance sheets. The regulator has yet to announce details on the 7Advanced Info ServiceAdvanced Info ServiceMHz spectrum allocation.
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