Key Rating Drivers
Rating Equalised with AIS’s: The ratings of AWN are equalised with those of its parent, Advanced Info Service Public Company Limited (AIS; AA+(tha)/Stable/F1+(tha)), to reflect the strong links between AWN and AIS, under Fitch’s parent and subsidiary rating linkage criteria.
AIS owns 100% of AWN and fully controls the subsidiary’s management and operations. AWN was awarded a 3G licence in Thailand in 2012, and is of strategic importance to its parent because it is being used as a vehicle to migrate AIS’s business and subscribers from the 2G concession scheme 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 the 3G network rollout.
Major Contribution Expected from AWN: Fitch expects AWN to be a major revenue and EBITDA contributor to AIS, accounting for over 75% 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 its 3G network.
Weaker Standalone Credit Profile: 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. Fitch expects AWN’s funds flow from operations (FFO)-adjusted net leverage ratio to stay around 3.0x in the medium term, compared with AIS’s consolidated leverage of below 1.5x.
RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
-An upgrade of AIS’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