Moody's Sees Positive Credit Outlook To True Corp: 3G Auction

[webfact]

3G AUCTION

Moody's sees positive credit outlook to True Corp

The Nation

BANGKOK: -- True Corp's success in winning three lots of 3G spectrum bandwidth for a total bid price of Bt13.5 billion is credit positive to the company, said Moody's Investors Service

Issuance of the 3G licenses to its wholly-owned subsidiary, Real Future Co Ltd, under the current format and prices will bring certainty to True Corp's operating platform ahead of the expiration of its existing 1,800-megahertz (MHz) concession agreement with CAT Telecom in September 2013, under which True Corp had 17.3 million subscribers as of June 2012, Moody’s said in its "Credit Outlook" report.

True Corp also serves 2.0 million subscribers under its 850MHz 3G reseller agreement with CAT, which is currently being renegotiated as a result of regulatory scrutiny of the contract terms. Since commencing commercial 3G services in August 2011 under the reseller agreement, True Corp has enjoyed an early-mover advantage in offering 3G services under the TrueMoveH brand.

Moody’s does not rate Advanced Info Service and Total Access Communication, which also win three slots each from the same auction.

According to Moody’s, the outcome is positive for True Corp, given its relatively weaker financial stances.

"With the resultant level playing field, we now expect greater competition among operators for 3G services as they jockey for position, which will test True Corp's execution strategy," the rating company said.

Like Standard & Poor’s Ratings Services’ view, Moody’s considered that the completion of the 3G auction is also positive for Thailand's telecom industry because it ends years of protracted regulatory uncertainty, especially after a court injunction in September 2010 thwarted the regulator's attempt to conduct 3G auctions at that time.

Successful issuance of the 3G licenses will lend a degree of certainty to the operating platform of all three telecom service providers in Thailand, whose current 2G concessions from state-owned agencies, CAT and TOT, expire between 2013 and 2018, with no certainty of contract renewals.

"We note some remaining uncertainty about the current auction format and pricing, which could result in a court injunction. However, if the auction process concludes and the Thai government awards the licenses - a process that could take up to 90 days - it would alleviate some of the uncertainty regarding True's 3G strategy, concession structure and operating platform," it said.

True Corp’s 12-month adjusted consolidated debt/EBITDA was 4.8 times. More bank loans to finance the 3G investment would raise the ratio to over 5 times.

Moody’s calculated that cumulative license fees for the 2.1GHz licenses at 5.75 per cent of revenue are much lower than the 30 per cent revenue-sharing arrangements True Corp. is subject to under the current concession agreement and the cost-plus arrangement under its reseller agreement with CAT.

"We expect the lower fees to support operating margins and help with True Corp's deleveraging over the next two to three years."

-- The Nation 2012-10-25

[asiawatcher]

As of Moody's needs to waste time rating Thai companies.

[jerrysteve]

I guess after Moody's got their rearend reamed a while back, they are now reaching for the bottom of the barrel...Thailand!

Edited October 25, 2012 by jerrysteve