AIS looking for revival in earnings next year

AIS 1 2 Call 2 years ago.

Bangkok Post (3 Nov 2007.) Profits have fallen steadily since 2005Advanced Info Service, the country's largest mobile operator, expects its core earnings to grow in 2008, after declines since 2005, due to rising tariffs and strong data services.

Earnings before interest, tax, depreciation and amortisation (EBITDA) should not improve much this year because the company spent more to lift its revenues, said Pornrat Janjarassakul, head of corporate planning and investor relations.

Service revenues, which accounted for more than 80% of its total and fell in the last two years during a fierce price war, were expected to be flat or slightly higher this year and rise in single digits in the next few years, he said.

''Service revenue growth in the next few years should be in single digits. We have a turnaround this year after we saw a year on year rise of service revenues in the second quarter,'' Mr Pornrat explained.

AIS was expected to report a 2007 EBITDA of around 43.5 billion baht, up 0.6% from 2006, and a 4.2% rise in revenues to 95.3 billion baht, according to 20 analysts polled by Reuters Estimates.

The company has raised tariffs for new subscribers gradually this year and plans to increase rates for existing clients next year when consumer confidence is expected to improve after a Dec 23 general election, said Mr Pornrat.

''Prices should hit bottom this year,'' he said, referring to Thailand's mobile phone rates, the world's third cheapest after India and China. ''Our competitors already raised prices by 10%, but their rates are still 20% cheaper than ours. With this gap, we can't raise prices at the moment.''

Revenues from data services, which accounted for about 10%, were expected to rise 15% this year after annual 30% growth in the last two years and growth would remain in double digits in the next few years, he said.

Contributions from data services should rise to 20% of revenues in the next three or four years when Thailand, the world's second heaviest mobile user after the United States with estimated calls of 600-700 minutes per user per month, has third-generation (3G) mobile services, he said. AIS, one-fifth owned by Singapore Telecommunications Ltd, has spent 18 billion baht on its network this year, down from 20 billion last year due to less competition, and planned to spend 16 billion baht next year, he said. The budget may rise to 25 billion baht if AIS obtained a licence to operate long-delayed 3G services in the fourth quarter of 2008 and it planned to launch 3G services to cover 10 major cities in 2009, he said.

''Capital expenditure should be around 25 billion baht in the next few years to expand the 3G network. We have more room to borrow money due to our low gearing,'' Mr Pornrat said. AIS, which had a net debt to EBITDA ratio of 0.55 times compared with the 1.5 to two times of regional peers, plans to take loans or issue bonds to finance the 3G network expansion.
The launch of 3G in Thailand would not only enable firms to tap new revenues by beefing up voices services with music, video, pictures and data, but was also a key step in reducing regulatory costs for operators, Mr Pornrat said. ''3G in Thailand is a unique case because it's a cost-driven project,'' he said. AIS, which now paid 25% of revenues to state-run TOT for the rights to operate networks, should pay 7% of revenues under the 3G licence, he added. AIS also plans to launch WiMax, a new super high-speed wireless standard that provides internet access to home computers and mobile phones and seen as a new growth driver for the company in the next few years.

Thailand, where there are more than 46 million mobile phones, or about 70 per 100 people, has 700,000 to 800,000 high-speed broadband Internet users, a very low portion of its 16 million household, he said. REUTERS