Fitch Ratings: Dispute Settlement Costs Trim DTAC#s Rating Headroom

Stocks and Financial Services Press Releases Friday January 11, 2019 17:24
Bangkok--11 Jan--Fitch Ratings

The announcement by Thailand's third-largest mobile operator, Total Access Communication Public Company Limited (DTAC; BBB/AA(tha)/Stable), that it has agreed to a settlement with state-owned CAT Telecom Public Company Limited (CAT) potentially reduces certain uncertainties about their disputes over a concession agreement that ended in September 2018. However, the settlement cost of THB9.5 billion reduces DTAC's rating headroom, Fitch Ratings says.

DTAC will be able to easily manage the THB9.5 billion settlement as it had a cash balance of THB26 billion at end-September 2018. However, if the company proceeds with the payment, it will increase our projected FFO adjusted net leverage for DTAC for 2019 to 2.4x, from 2.1x, close to the 2.5x level at which Fitch would consider negative rating action. Its financial leverage was 1.7x at end-September 2018.

Fitch expects DTAC's market position to strengthen in 2019, after winning 1.8GHz and 900MHz spectrum. This should help plug the gap in its spectrum portfolio and network quality that has constrained its competitiveness over the past few years. Nevertheless, meaningful network improvements and brand re-building could take a few more quarters to take effect, suggesting EBITDA recovery may take place only in 2020. This should allow it to maintain leverage within Fitch's negative rating guideline of 2.5x.

The announced settlement is yet to be approved by the shareholders. The arrangement does not cover the disputes between the two parties in their entirety, including certain disagreements over revenue-sharing relating to excise tax and interconnection charges.

We expect private telecom operators, including DTAC, to benefit from Thailand's transition to a licence regime since 2012 from a model of concession agreements between government-owned telecom operators and private operators that governed their 2G operations. The new framework is more transparent and provides a more level playing field to operators like DTAC.

Latest Press Release

KBank launches automated currency exchange machine to please globetrotters with best rate ever!

Mr. Amorn Suvachittanont (left), KBank First Senior Vice President, and Mr. Manabu Shintani (right), Chief Executive Officer of ActPro Co., Ltd., unveiled automated currency exchange machines, which allow customers to exchange Thai Baht to three foreign...

Xpress Money#s Business Solution FLEX Strengthens, Powered by Collaborations With Banks, NBFIs and Online Remittance Players

Global organisations in the remittance and financial services industries have chosen to partner with Xpress Money, a Finablr company, to utilise its cross-border remittance capabilities and cater to the growing demand for convenient money transfer...

Digital Asset TDN Used to Acquire $25m of Graphite

SovTech technology firm TODAQ, the creators of the cryptographic digital asset TDN, have reached an agreement with Gratomic Inc for the purchase of US$25m of graphite. This is the first deal of its kind, with the graphite to sit in the TDN reserve...

Bangkok Bank reports third quarter 2019 net profit of Baht 9,438 million

In 2019, the Thai economy is forecast to expand at a slower rate than in 2018. Slowing global growth, intensifying trade tensions and the unrelentingly strong Baht have weighed on both exports and tourism. Meanwhile, private consumption and private...

KTC declares 4.205 billion in first nine months net profits. Receivables growth hit an all-time high in the past two years with plans to expand member base and fortify quality of ports.

KTC announces net profits for the first nine months with a 8 percent growth at 4.205 billion. Budget will be allocated to stimulate marketing activities and expand member base. Policy to expand member base and in main business caused portfolio to have...

Related Topics