Fitch Upgrades Thailands AWN to AA+(tha); Stable Outlook

Stocks and Financial Services Press Releases Monday October 28, 2013 16:51
Bangkok--28 Oct--Fitch Ratings

Fitch Ratings (Thailand) Limited has upgraded Advanced Wireless Network Company Limited’s (AWN) National Long-Term Rating to ‘AA+(tha) from ‘AA(tha)’. The Outlook is Stable. At the same time, Fitch has affirmed its National Short-Term Rating at ‘F1+(tha)’.

KEY RATING DRIVERS:

Rating Equalised with AIS: The rating upgrade follows the upgrade of Advanced Info Serviced Public Company Limited’s (AIS) National Long-Term Rating to ‘AA+(tha)’ from ‘AA(tha)’. AWN’s ratings are equalised with its parent, AIS, to reflect the strong links between AWN and AIS, as per Fitch’s parent and subsidiary rating linkage criteria.

AIS-AWN Links Strong: AIS wholly owns AWN and has full management and operational control of AWN. AWN was awarded a 3G licence in Thailand in 2012 and is of strategic importance to its parent. AWN is being used as a vehicle to migrate AIS’s business and subscribers under the 2G concession scheme - which is exposed to legal and regulatory uncertainty - to the more transparent 3G licence system. AIS has provided substantial support to AWN, including personnel, and assistance in operations and network development, which helps mitigate execution risk of AWN’s 3G network and service rollout.

Major Contribution Expected from AWN: Fitch expects AWN to be a major revenue and EBITDA contributor to AIS - likely over 70% and 90% respectively after 2015. In the long run, AWN will become the principal constituent of AIS’s business once the majority of subscribers have migrated to the new 3G network.

Weaker Standalone Credit Profile: Fitch believes that AWN’s standalone credit profile will remain weaker than that of AIS in the medium term. A key constraint is AWN’s higher financial leverage. While AWN’s financial leverage will continue to improve over the next three years, its funds flow from operations (FFO)-adjusted net leverage ratio is likely to remain around 2.5x-3.0x in the medium term, in comparison to AIS’s consolidated leverage of below 1.5x. In addition, slower than-expected subscriber migration to the new 3G network could lead to lower revenue and profitability, and slower-than-expected deleveraging.

RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
-An upgrade of AIS’s ratings is likely to lead to an upgrade in AWN’s ratings
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
-A downgrade of AIS’s ratings
-Weakening in links between AIS and AWN, including a reduction of AIS’s stake in AWN

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