Advanced Info Service Plc. Investor Presentation September 2015
AIS at a glance No.1 mobile operator in Thailand 40m users Others IR post 7% 2% paid 19% 13% 52% Voice pre 47% Non- paid voice 29% 87% 44% Breakdown of Revenue Market Share Breakdown of Service Revenue Breakdown of customers Data as of 2Q15 Investment highlight Strong capital structure Moving toward licensing scheme Dividend payout ratio at 100% 113% 2G (BTO) 3G (License) 2Q15 100% 100% 93% Net debt to equity 0.47 900MHz ended 2100 MHz ended Sept-15 Dec-27 12.15 8.43 10.9 Net debt to EBITDA 0.32 1800MHz under 12 Bt remedy period is extended until the ROE 90% auction completed. 2011 2012 2013 2014 2
From Telecom Service Provider to Digital Life Service Provider Fixed Digital Mobile Broadband Contents Largest telecom New business growth New source of revenue infrastructure in Thailand Driven toward convergence Support mobile and fixed Core element in digital Operating synergy with mobile broadband business era of “ IoT ” business Partnership model 3
Business strategies in 2015 Continue to enhance network quality for better customer experience by increasing network capacity More aggressive 3G handset campaigns for achieving 2G subscriber migration, lowering regulatory fee and defending market share. Offer more variety of on-top packages to serve needs of different customer segments, leading the way to data monetization Acquire more spectrums to develop the technology and increase capacity AIS Fibre is in a beginning stage with insignificant contribution expected in the first year, but rather focusing on service quality and installation ramp-up. 4
Continued enhancing network and investing for future capacity Base stations and towers Executing 6-sector cell splitting to achieve best • Base station capacity efficiency 23,800 21,300 (2,500 small cells) FY14 2Q15 • Towers (including 13,200 towers under dispute) 20,500 19,700 FY14 2Q15 AIS WiFi Fiber optics Completed 38,000 28,000 123,000 km (4,000 SuperWiFi) FY14 2Q15 as of Jun-15 5
1H15: 3G device penetration increased led by AIS Super Combo 3G Handset penetration • Offer more handset discounts, with free on 2.1GHz-License airtime, • free data usage 62% 58% 54% 49% • AIS LAVA + OLA Pop sold in 2Q15 46% 1.1 mn units • 77% of subscribers who changed to LAVA were data users , compared to 36% when 2Q14 3Q14 4Q14 1Q15 2Q15 before changing. • New 3G house-branded phone: Smartphone penetration on 2.1GHz-License AIS LAVA PRO 5.5 and LAVA W1 49% 44% 39% 36% 35% 2Q14 3Q14 4Q14 1Q15 2Q15 6
2H15: To increase 3G device penetration to 70% 40m AIS 2.7m 37m 900MHz-BTO 2100MHz-License AIS handset trade-in campaign 14m 23m • Target AIS’ existing customers • Customers can bring their old phone to trade with 3G Device 2G Device AIS OLA POP (feature phone) + Bt200 top-up or 62% penetration AIS LAVA 3.5 ” (entry level smart phone) at Bt690 As of 2Q15 7
Paving the way for monetization Promote on-top packages Expand data users 20 mn 17 mn 13 mn 1H15 1H14 1H13 Encourage use of Supported by 4G application & content 4G Volume of Usage MB/ data sub/ mth 250 MB 1,600 MB in 1Q13 in 2Q15 Data usage increased substantially in the last two years with potential of higher growth from 4G 8
Expiring concession Upon concession expiry, remedy Awaiting NBTC’s consideration period for 900MHz is expected NBTC may impose different approach from before auction. 1800MHz remedy. To evaluate for feasible options considering Options to handle remaining 2G financial impact customers depending on number of Remaining customers are expected to be 30% customers on 900MHz of total subscribers by end of 2015 13,198 towers under dispute Case under arbitration Ongoing Tower dispute Ongoing negotiation with TOT to resolve dispute and build long-term business model 9
Spectrum strategy Current nt Statu tus Bandwid width th 2.1GHz license 15MHz 3G service expired 1800MHz concession 12.5MHz since Sep 2013 expiring in Sep 2015 900MHz concession 17.5MHz to be returned New acquisi isitio tion Bandwid width th Plan options depending on 900MHz license 10MHz number of subscribers 1800MHz license 12.5 or 15MHz most common for 4G Partnership with TOT for 2.1 and 2.3 GHz available Under discussion 10
Spectrum auction The IM of 1800MHz auction was announced on the Royal Gazette on 24 August 2015. As for the draft of Information Memorandum of 900 MHz auction, it is under the process of public hearing. 1800 MHz 900 MHz Two licenses of Option 1: 2 x 15 MHz or Two licenses of 2 x 10 MHz Spectrum packaging Option 2: 2 x 12.5 MHz Depending on spectrum return from CAT Option 1: Bt15.9bn or Bt19.9bn Option 2: Bt13.3bn or Bt16.6bn Bt11.3bn or Bt16.1bn, Starting price depending on number of bidders depending on spectrum return and number of bidders Simultaneous Multiple Round Ascending Auction Auction method Until 15 September 2033 (~ 18 years) 15 years Validity • • Covering 40% of population within 4 years, and 50% Covering 40% of population within 4 Network requirement within 8 years years • • Technology neutral Technology neutral 1. 50% within 90 days after winner announcement Payment 2. 25% at end of year 2 3. 25% at end of year 3 27 July and 3 August 11 and 31 August Public hearing sessions 11 November ~ 11 November (TBC) Auction date 11
4G Readiness: Keep our DNAs work Capital al to support auction Get 4G 4G Device ready Roll out Networ ork quickly Reserve price as per IM Multi-band antennae of 1H15 new handset 15% Most of sales were 4G-enabled • 1800MHz: 13.3bn / license 3G N/W (12.5MHz) or 15.9bn / license (15MHz) Cheapest 4G handset • 900MHz: 11.3bn / license Bt5,000 in 1H15 was approx. (10MHz) Fiber optic backhaul AIS 4.7 Asia ex. Japan Applica icati tion ons s work Europe 100% 2.0 better on 4G ready US telcos 1.0 0.28 0.32 • Live video streaming 0.14 small cells 2015E 2013 2014 2Q15 100% Net debt/EBITDA • VoLTE, HD voice calls on LTE ready Picture from Qualcom 2015E from global research 12
AIS officially launched Fixed Broadband Officially launched on 27 th April : Bangkok, Chiang Mai, Nakhon Ratchasima, Udon Thani, Khon Kaen, Phuket, and Hat Yai Special package since August offering three services for AIS Postpaid customers: - fixed broadband - AIS Playbox - AIS fixed line number 13
Fixed Broadband: maintain target with quality focus What have we faced in 1H15? Plan in 2H15 • • Intended to penetrate with quality Streamline workflow for service and • Required more skillful teams to installation to ensure quality • respond to huge demand Increase installation workforce • Quick ramp-up to reach target of 80,000 • Chiangmai Coverage plan in 2015 Year-end target • Udonthani Capacity 80,000 • Kon kaen 250,000 • Korat households Homespass Actual 1mn exponential Target ramp-up • Bangkok 2H15 • Chonburi • Phuket 11,900 Jan Feb Mar Apr MayJun Jul AugSep Oct NovDec 14
Fixed Broadband landscape in Thailand 7mn subscr criber bers 5mn subscr criber bers in 5 years Others 3% Key player 28% 32% Others 37% Technology Technology Technology DL UL Price DL UL Price DL UL Price Mbps Mbps Mbps Mbps Mbps Mbps /month /month /month (Bt) (Bt) (Bt) Docsis 15 1.5 599 ADSL 10 0.512 590 ADSL 10 1 590 Docsis 30 3 1,299 ADSL 15 1 900 ADSL 13 1 690 Docsis 50 5 2,799 VDSL/FTTx 30 3 1,200 ADSL 15 1 990 Docsis 100 10 4,999 VDSL/FTTx 50 10 2,500 FTTx 30 3 1,290 Docsis 200 15 9,999 FTTx 100 30 5,900 FTTx 40 5 2,200 FTTx 200 50 9,900 FTTx 50 5 3,500 15
Digital content: new s-curve roadmap Medium-term Long-term Short-term Video Game banking Mobile Cloud M2M 16
2Q15 and 1H15 Financial highlights Service revenue (ex IC) EBITDA Handset margin (Bt bn) (Bt bn) +3.8 YoY +2.9% YoY +14% YoY +12% YoY +260 bps YoY +210 bps YoY +0.5% QoQ 0% QoQ -190 bps QoQ 58.6 60.8 32.3 36.1 3.9% 3.1% 2.0% 29.6 30.3 30.5 15.8 18.1 18.1 1.0% -0.4% 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 • YoY growth driven by continued • Grew slightly below full year guidance • Strong YoY improvement from better promotion of AIS LAVA service revenue, positive handset • QoQ decreased from less units sold margin and lower expenses and lower price % EBITDA margin Net profit % Service EBITDA margin (Bt mn) +510 bps YoY +360 bps YoY +410 bps YoY +16% YoY +40 bps QoQ +10% YoY +170 bps YoY +280 bps QoQ -0.5% QoQ 55% 55.4% 55.2% 47.4% 18 19.7 51.6% 45.9% 50.3% 43.3% 44.6% 8.5 9.9 9.8 44.2% 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 • YoY, net profit strongly improved due to • • Rose from strong service EBITDA Driven by higher service revenue EBITDA growth over compensating rise growth and better handset sales and large regulatory fee saving in D&A, finance costs, and tax margin YoY offsetting higher network OPEX 17
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