Investor Presentation Advanced Info Service Plc. February 2017 Ticker: ADVANC (SET) AVIFY (ADR)
AIS: Digital Life Service Provider Expand strongly into Partner to offer differentiated Continue leading in “ Fixed broadband ” “ Digital service ” “ Mobile ” Service revenue Video Started in 2015 • Bt122bn 49% 25% 21% 4% • 52% Non-voice 4Q16 • Covering 28 cities 40% IoT Game • 42% Voice 4Q16 Five (est.) focus areas 26% • Ready to service 35% 41mn users Revenue • 16% postpaid 5.2mn homes Subscriber market share Mobile • 84% prepaid market share Cloud money • 57% data users Strength Strength Strength • Nationwide 4G/3G/2G coverage • Leverage nationwide fibre to offer • Emphasize partnership & “ FTTx ” with focus on network quality ecosystem • Strong customer service and • Reached 35k subs/month • Leverage the large sub base and distribution channel acquisition rate or 40% of current telecom infrastructure industry net addition Target Target • Contributed 1.2% of revenue in • Mark leadership in mobile data • To pursue long-term growth with 4Q16 integrated services • Maintain competitiveness and cost efficiency Target • To become significant EBITDA margin: 40% Investment player in three years Net debt to EBITDA: 1.38x Highlights Dividend: minimum 70% 2
FY16 Recap FY16 – EBITDA (YoY) -14% YoY (Bt mn) 70,776 1,940 (4,665) 3,702 (773) (396) (9,620) 60,741 (223) FY15 Service rev Service cost Reg fee Net sales Net IC SG&A Others FY16 ex.IC ex.IC Key summary • Service revenue ex. IC improved 1.6% YoY from growth in mobile data usage and fixed broadband business. • The transition to the licensing base continued to result in lower regulatory fee, increased amortization of new licenses, network depreciation, and cost of partnership with TOT to utilize 2100MHz spectrum, towers, and network facilities. • Intense competition and protecting 2G base pressured handset margin and marketing expenses. FY16 – Net profit (YoY) • Overall, the continued investment and new -22% YoY (Bt mn) spectrum licenses caused higher D&A and finance cost. (10,035) 30,667 4,824 (1,172) (2,277) 175 • However, lower earnings and 39,152 government tax incentive resulted in lower income tax. FY15 EBITDA D&A Finance cost Tax Others FY16 3
Mobile: mark leadership in mobile data network Investment focus on 4G Efficiently utilize spectrum population coverage CAPEX to sales ratio 4G 1800x15MHz 39% 200% 50% 28% 27% 24% 4G 3G 150% 2100x15MHz 0% 98% 98% 98% 98% 98% 97% 100% 80% 4G 3G 2G 900x10MHz -50% 50% 2100x15MHz 4G 3G 0% -100% 2G 3G 2G 3G 2G 3G 4G 2G 3G Partnership with TOT 2013 2014 2015 2016 Stay advanced in technology and maximize existing capacity • Established the Joint Innovation Center with Huawei to create new network solutions • Examples of success: 6-sector sites, MIMO 32T32R, NB-IoT 4
Mobile: increase smartphone adoption through attractive offerings 4G & 3G subscribers 2G subscribers • Continue to migrate the • Focus on high-value segments high-ARPU among 4.7mn • Launch competitive pricing with affordable smartphones 2G users through targeted subsidy Package Offering Postpaid Feature phone Top up Bt100 i-Entertain Bt499, 11GB, NON-STOP FUP Free voice call Bt500 MAX SPEED Bt488, 13GB Prepaid Smartphone Top up Bt900 Bt128/week, 512 unlimited data Free voice call unlimited Renowned AIS @ 512kbps Bt4,500 house-brand handset 5
FBB: increase existing utilization with selective expansion Fixed broadband Household market size penetration 2013 4.9mn 24% 5.4mn 26% 2014 2015 6.2mn 29% 2016E 7.0mn 33% Homepass 6
FBB: differentiated product with competitive pricing • Offer competitive entry- level “ Fibre ” packs to attract ADSL users. • Promote high-end package subscription at better value for money, with up to 100/10Mbps at Bt990 with AIS PLAYBOX and free HOOQ for 12 months Leverage existing channels AIS shop+ Web+ Authorized Direct and build new ones Telewiz Call center dealers sales 7
Digital service: exclusivity in video contents Mobile platform Fixed platform small screen to large screen High-speed internet Multiple platforms Success in 2016 More exclusivity in 2017 Exclusive contents Potential cross-selling through bundling services 8
Digital service: expand into Enterprise Cloud with global partners • IT services • Service & Monitoring • IT consulting Strategic Partnership to bring Global Cloud to Local • Cloud storage • Security Collaborations in • • Productivity Network Partnership • Cloud Solution Provider • Integrated Billing • Enterprise cloud • Integrated backup service AIS-Owned World Class Data Center Carrier Graded Tier 4 with ISO 27001 Certification at 2 Locations AIS Enterprise Data Network 9
FY17 Guidance 2017 • Improved network quality and increased Service revenue (ex IC) +4-5% YoY smartphone adoption • Support by higher smartphone adoption Increase with • Continue migration of 2G users through Handset sales near-zero margin targeted handset subsidies • Improved revenue and cost management EBITDA margin offset by full-year payments for TOT 42-44% partnership • Strengthen 4G capacity with 2CA and 3CA expansion CAPEX Bt40-45bn • Selective expansion for fixed-broadband business Minimum 70% • Preserve financial health and flexibility for Dividend policy future growth payout ratio 10
APPENDIX 11
FY16 Financial Highlights FY16 Bt mn 3Q16 4Q16 % YoY % QoQ FY15 FY16 %YoY 4Q15 Guidance Service revenue ▲ 5.8% ▲ 3.2% ▲ 1.6% Slightly 29,887 30,626 31,617 120,621 122,561 ex. IC increase ▼ 1.3% ▲ 64% ▼ 14% Sales revenue 27,798 23,924 8,422 5,064 8,315 Decline Total revenue ▲ 3.9% ▲ 11% ▼ 2.0% 39,784 37,096 41,319 155,213 152,150 N/A ex. Construction Cost of service ▲ 43% ▲ 12% ▲ 4.1% (10,57 8 ) (13,537) (15,155) (50,62 4 ) (52,694) N/A ex. IC ▲ 41% ▲ 9.6% ▲ 48% SG&A (7,260) (7,96 1 ) (20, 091 ) (29,77 6 ) (5,643) N/A ▼ 40% ▼ 0.9% ▼ 22% NPAT 10,79 1 6,529 6,468 39,15 2 30,66 7 N/A ▼ 12% ▼ 1.3% ▼ 14% EBITDA 17,204 15,257 15,058 70,776 60,741 N/A Normalized ▼ 13% ▼ 1.3% ▼ 11% 17,204 15,257 15,058 70,776 62,949 N/A EBITDA ▼ 680bps ▼ 470bps ▼ 570bps 38-39% EBITDA margin 43.2% 41.1% 36.4% 45.6% 39.9% ▼ 250bps ▲ 1280bps ▼ 340bps Sales margin Negative -0.8% -16.1% -3.3% -0.8% -4.2% ▲ 41% ▼ 20% ▲ 47% Capex ( 7,4 42) ( 13,236 ) ( 10,523 ) (32,255) (47,554) Bt40bn ▼ 40% ▼ 0.9% ▼ 22% EPS 3.63 2.20 2.18 13.17 10.31 N/A 12
Strong net add driven by handset campaigns postpaid prepaid Blended postpaid prepaid ARPU (Bt/sub/month) Subscribers (mn) 612 608 608 597 600 251 34.6 254 251 248 248 33.5 33.5 33.8 33.1 195 194 188 186 186 6.4 5.4 5.4 5.8 6.1 MoU (min/sub/month) 226 292 279 246 215 Net addition (‘000) 330 320 305 313 296 286 272 234 213 201 837 609 459 400 321 296 VoU (GB/data sub/month) 222 68 26 3.0 3.6 5.0 4.1 2.6 2.0 3.2 2.2 3.4 2.7 2.4 2.4 2.7 -19 1.9 2.0 4Q15 1Q16 2Q16 3Q16 4Q16 4Q15 1Q16 2Q16 3Q16 4Q16 • • AIS recorded 41mn subscribers , net add from 321k Blended ARPU increased QoQ, reaching Bt251 from postpaid and 837k prepaid, supported by attractive larger data subscribers. Postpaid ARPU declined from handset offerings. expansion to mid-tier segment while prepaid ARPU • declined due to migration of high-tier customers to At the end of 2016, postpaid customers expanded to postpaid. 16% of subscriber base from 14% last year due to • natural migration and attractive handset campaigns. Blended VoU rose to 3.6GB/ data sub/ month from popularity of streaming. MoU declined as data cannibalization continues. 13
Breakdown of OPEX and D&A in FY17 (Bt mn) D&A Network OPEX xx xx Network depreciation 15,708 Normal network OPEX 5,384 9,500 Cost of partnership License with TOT on 8,000 3,775 5,545 Amortization 2.1GHz, towers 900/1800/2100MHz* and equipment FY16 FY17 2H16 FY17 *900MHz license takes full year amortization in 2017 14
Historical profitability and CAPEX trend EBITDA margin 46% 45% 44% 42% 42% 40% 36% 33% 33% 32% 32% 32% Industry AIS 2011 2012 2013 2014 2015 2016 NPAT margin 25% 24% 24% 24% 20% 18% Industry 14% 14% 13% 13% 9% 9% AIS 2011 2012 2013 2014 2015 2016 CAPEX to service revenue ex. IC 41% 28% 27% 24% AIS’ CAPEX to 48 9% 6% service revenue ex. IC 33 32 28 AIS’ CAPEX 10 6 (Bt bn) 2011 2012 2013 2014 2015 2016 15
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