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Fitch: No Significant Credit Impact from Thailand's Upcoming 3G Licencing
Debt ratings agency, Fitch says that it does not anticipate any substantial impact on the credit quality of Thailand's mobile phone operators from the upcoming 3G licence spectrum auction. Fitch offers ratings on two of the country's operators: Advanced Info Service (AIS, 'BBB+'/Stable) and Total Access Communication (DTAC, 'BBB-'/Stable).
Although the expected high upfront licence fee and investment required to offer 3G services could result in an increase in net debt and financial leverage during the next two to three years, these companies' solid cash flow generation and strong financial positions should help them withstand potential additional costs. The agency also notes that despite the high capex - the key benefit of the 3G licence is lower regulatory costs - which should boost the operators' profit margin over the medium-to-long-term.
The agency notes that the licensing should also help pave the way towards industry restructuring and create a more level playing-field among telecom operators - given the unified terms and conditions under the new licence scheme. The migration to the 3G platform should trigger the concession negotiation process with AIS' and DTAC's concessionaires, TOT Public Company and CAT Telecom Public Company respectively, which could lead to changes in operating terms and conditions of the 2G concessions to bring them more in line with the new 3G licence scheme.
The report also notes that the additional spectrum should help introduce addition revenue streams, particularly non-voice services including mobile internet, content download and broadband wireless access. The potential growth in non-voice revenue should help offset the drop in traditional average revenue per user caused by intense competition. On the other hand, the agency notes that 3G licencing could lead to the entry of new players, creating greater market competition which could affect the profitability of existing operators.
The report can be downloaded from the Fitch Ratings website (registration required).
Posted to the site on 24th September 2009