AIS - Removal of Bad Debtors Helps to Boost Profits
First quarter operating profit at Thai mobile market leader AIS has risen 26% year on year to Bht7.66bn as low SG&A costs complemented a 21.9% increase in overall revenues. The progress came partly on the back of a programme to reduce bad debt, and therefore bad debt provisions, which saw the postpaid churn rate soar last year as offending accounts were disconnected. This extraordinary gain was complemented by an accounting change relating to the amortisation of goodwill β again, a one-off effect β as well as a general drive to reduce marketing spend as a percentage of revenues.
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Effective ARPM, Outgoing Traffic (Bht), Q1 06 - Q1 08
The lack of goodwill amortisation meant that EBITDA was only up 17.0%, which meant a reduction of the margin from 44.7% to 42.9% - still a very respectable figure. It should be noted, however, that due to the recent change in operating and accounting practices in Thailand relating to interconnection (IC), the Q1 08 figures include IC revenues and associated costs, whereas the Q1 07 figures do not. (The impact of the change in the IC regime was only fully realised in Q4 07.) On a like-for-like basis, excluding IC, the EBITDA margin in fact increased from 44.7% to 49.9%.
These statistics indicate that the IC game is a lower margin business for AIS, which indeed it is, as IC costs rose to 97.3% of IC revenues in Q1 08, from 79%, 88% and 92% in the preceding three periods. The trend is the result of AISβ tariffing policy which has introduced flat rates for off-net calls, particularly at off-peak times, boosting outgoing minute usage by 7% in the last quarter alone. This produced a second successive quarterly increase in ARPU to Bht280 per month, although year on year the metric was still down by almost 12% as a result of continued pressure on pricing and the dilutive effects of multiple SIM ownership. Customer growth for the year was 19.0%, thanks to a 4.1% increase and almost 1m net additions in Q1 08, leaving underlying revenue growth at under 10% - after taking into account the boost from the inclusion of IC in-payments in the top line this year.
After all of the extraordinary factors, the AIS results follow a familiar pattern for the region: solid, double-figure customer growth, mitigated by generally decreasing ARPU, giving rise to revenue gains struggling to get above single digits β whilst a focus on cost control and customer management helps further down the P&L.
Posted to the site on 21st May 2008
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