Investor Presentation Advanced Info Service Plc. May 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 Commercial launch • Bt31.4bn 48% 26% 21% 4% in 2015 • 57% Non-voice 1Q17 40% IoT Game • 36% Voice 4Q16 Five • Covering 28 cities focus areas 26% 35% 40.6mn users • Ready to service Revenue • 16% postpaid Subscriber market share Mobile • 84% prepaid 5.2mn homes market share Cloud money • 59% data users Strength Strength Strength • Nationwide 4G/3G/2G coverage • Leverage nationwide fibre to offer • Emphasize partnership & “ FTTx ” – fibre to premise with focus on network quality ecosystem • Strong customer service and • Offer with “AIS PLAYBOX”, • Leverage the large sub base and distribution channel a VDO platform telecom infrastructure • Contributed 1.7% of revenue in Target Target 1Q17 • Mark leadership in mobile data • To pursue long-term growth with integrated services • Maintain competitiveness and Target • To become significant cost efficiency player in three years EBITDA margin: 44.6% Investment Net debt to EBITDA: 1.2x Highlights Dividend: minimum 70% 2
1Q17 Recap YoY EBITDA QoQ EBITDA +29% +15% (Bt mn) (Bt mn) YoY QoQ 198 153 2,670 2,520 384 1,064 17,347 17,347 15,058 13,415 1Q16 Gross profit SG&A Others 1Q17 4Q16 Gross profit SG&A Others 1Q17 YoY NPAT QoQ NPAT (Bt mn) (Bt mn) +19% 89 -4% 1,074 QoQ 2,844 39 2,289 3,932 60 YoY 541 914 13 7,693 6,468 8,073 7,693 1Q16 EBITDA D&A Fin. Cost Tax Others 1Q17 4Q16 EBITDA D&A Fin. Cost Tax Others 1Q17 • Service revenue improved 4% YoY from 4G • Service revenue declined 0.8%, offset by lower consumption and fixed broadband while regulatory fee handset subsidies. • Tax benefits from investment were Bt835mn in 4Q16 continued to decline. • Full impact of payments to TOT and D&A from 4G and Bt209mn in 1Q17. network investment and licenses pressured profitability. • Lower handset subsidies and focus on quality subscribers. 3
Mobile: lead in quality 4G network 4G base station (‘000) 45 • Nationwide coverage of 98% 42 • Deploy 2CA in all districts and 3CA in key cities 21 • Guaranteed by OOKLA as “Thailand’s fastest 16 mobile network” for two consecutive years 6 2Q16 3Q16 4Q16 1Q17 1Q16 Category 1 4G handset penetration 35% 29% • 4G adoption continued to rise supported by more 24% 19% affordable 4G handsets, price plans with large data 16% allowance, and new contents. 2Q16 3Q16 4Q16 1Q16 1Q17 Category 1 4G handset ARPU blended 4G handset Bt/month 600 • 4G users continue to be high quality despite diluted 450 ARPU from adoption of mid-tier 4G handsets. 300 150 0 2Q16 3Q16 4Q16 1Q17 1Q16 4
Mobile: focus on postpaid segment, capturing high-value customers Focus on mid- to high ARPU subscription • Offer high-end smartphones with discounts up to 40% e.g. AIS HOT DEAL with committed monthly package of Bt499+ • Target mid-end users by offering discounts up to 70% e.g. SUPER COMBO and SUPER VALUE PACK with committed monthly package of Bt299+ *customers contracted for 12 months 5
FBB: expand subscriber base and ARPU Key highlight figures Current offerings • • 1Q17, AIS Fibre had 374k, a net add of 72k, with Segmented offerings in two types of package: coverage in 28 cities. 1) pure broadband connection 2) broadband connection with video contents via AIS • Revenue contribution increased to 1.7% of service PLAYBOX revenue ex. IC. • ARPU improved to Bt541. • Gain market share with competitive fibre pricing while encouraging customers to upgrade to higher-speed ARPU trend (Bt/month) package 583 541 • 520 Continue to leverage/supplement mobile subscriber 510 498 base with special discounts to enhance brand loyalty 1Q16 2Q16 3Q16 4Q16 1Q17 6
Digital service: create differentiation on AIS PLAY & PLAYBOX with new contents • Registered 1.5mn active users on AIS PLAY and 300k on AIS PLAYBOX • Contents from HBO, FOX, NBA, Cinemax, Warner, Viu, etc. were added to respond to higher demand for HD video streaming and enhance customers’ stickiness. Fixed broadband Mobile 7
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 8
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 9
APPENDIX 10
Financial Highlights FY17 Bt mn 4Q16 1Q17 %YoY %QoQ 1Q16 Guidance ▲ 4.0% ▼ 0.8% Service revenue ex. IC 30,148 31,617 31,364 +4-5% Sales revenue ▲ 13% ▼ 23% 5,663 8,315 6,407 increase ▲ 4.3% ▼ 6.0% 37,252 41,319 38,858 Total revenue Cost of service ex. IC ▲ 20% ▲ 0.3% ( 12,693 ) (15,155) (15,20 3 ) SG&A ▼ 33% ▼ 32% (7,96 1 ) (5,4 39 ) (8,095) EBITDA ▲ 29% ▲ 15% 13,415 15,058 17, 347 EBIT ▲ 12% ▲ 26% 9,438 8,340 10,540 NPAT ▼ 4.7% ▲ 19% 8,073 6,468 7,69 3 near zero Sales margin ▼ 640bps ▼ 340bps -0.3% -3.3% -6.7% margin EBITDA margin ▲ 860bps ▲ 820bps 42-44% 36.0% 36.4% 44.6% EBIT margin ▲ 690bps ▲ 180bps 25.3% 20.2% 27.1% NPAT margin ▼ 900bps ▲ 410bps 21.7% 15.7% 19.8% Capex ▼ 4.9% ▲ 9.4% ( 12,102 ) ( 10,523 ) ( 1 1,509) Bt40-45bn 11
Mobile: focused on acquiring quality subscribers postpaid prepaid Blended postpaid prepaid ARPU (Bt/sub/month) Subscribers (mn) 608 608 597 600 579 244 34.6 34.0 251 248 248 251 33.5 33.5 33.8 194 188 186 186 181 5.4 5.8 6.4 6.7 6.1 MoU (min/sub/month) 215 279 226 205 320 246 313 305 296 Net addition (‘000) 280 272 213 234 201 190 837 VoU (GB/data sub/month) 459 400 321 296 222 232 26 3.6 5.7 4.0 5.0 4.1 3.0 3.5 2.6 3.2 2.2 3.4 2.7 2.7 -19 2.0 2.4 -615 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 • • AIS recorded 40.6mn subscribers , total net add Blended ARPU slightly declined from Bt251 to Bt244. of -383k (prepaid -615k and postpaid +232k). • Prepaid subsidy was more targeted while prepaid- • Blended MoU declined as data cannibalization to-postpaid trend continued, resulting in negative continues. prepaid net add. • Blended VoU rose to 4GB/ data sub/ month driven by 4G and the trend of HD videos streaming. 12
Breakdown of OPEX and D&A in FY17 D&A Network OPEX (Bt mn) xx xx Normal network Network OPEX depreciation 15,708 5,384 Cost of partnership 9,500 License with TOT on 8,000 Amortization 2.1GHz, towers 5,545 3,775 900/1800/2100MHz* and equipment FY16 FY17 FY16 FY17 *900MHz license takes full year amortization in 2017 13
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 14
Maintained strong financial position for future growth 1Q17 Balance Sheet 1Q17 Cash flow (Bt bn) (Bt bn) Cash increase others A/P Cash decrease spectrum license 15 spectrum license 32 payable Operating Investing Financing Net cash 73 113 Assets Liabilities 14 12 9.2 241 B/S 6.7 279 1Q17 95 interest- 1.1 0.7 0.3 0.2 bearing Equity 124 debt* Cash Income Net decrease Operating in ST loan Proceed of LT Payment of LT cash flow CAPEX loan borrowings decreased 38 tax paid Interest paid 42 PPE 12 others 14 13 26 retained earnings A/R cash others Operating cash flow remained strong to support Net debt to EBITDA = 1.2x network investment Interest bearing debt to Equity = 2.5x Average finance costs = 3.1% p.a. Current ratio = 0.43x • Maintaining investment grade credit ratings Return on Equity = 75% • Fitch: national rating AA+ (THA), outlook stable • S&P: BBB+, outlook negative 15
Mobile market share by revenue Service revenue (Bt bn) +6% YoY (against GDP of + 3.2%) 244 223 231 221 207 24% 183 19% 16% 17% 15% 15% 26% 29% 32% 30% 31% 32% 50% 52% 52% 52% 54% 53% 2011 2012 2013 2014 2015 2016 AIS Operator 2 Operator 3 Source: company information, AIS’s calculation 16
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