Investor Presentation Advanced Info Service Plc. 2Q16
2Q16 Highlights Service revenue (ex IC) in 2Q16 was contributed by growth in postpaid segment. • However, when offset with weak prepaid segment amidst intense competition, the service revenue (ex IC) was flat QoQ, and decreased by 1% YoY or flat when excluding one-time item in 2Q15. As handset subsidy scaled down in this quarter, while there was one-time USO fee in • 1Q16, EBITDA improved 27% QoQ. YoY EBITDA declined 5.8% due to handset subsidy. Likewise net profit improved 19% QoQ but declined 2.6% YoY. 900MHz license is effective from July 1 st , 2016. Service for 2G customers on 900MHz • continued while partial spectrum is used for 3G/4G to enhance network coverage. Revised guidance with service revenue (ex IC) to slightly increase from previous year and • EBITDA margin around 38-39% while CAPEX remains Bt40bn. 2
2Q16 Financial Highlights Bt million % YoY % QoQ 1H15 1H16 %YoY 2Q15 1Q16 2Q16 Service revenue ex. IC 30,148 30,169 60,778 60,317 ▼ 1.0% ▲ 0.1% ▼ 0.8% 30,468 Sales revenue 5,733 5,663 4,882 14,020 10,545 ▼ 15% ▼ 14% ▼ 25% Total revenue ex. 38,123 37,252 36,482 78,660 73,735 ▼ 4.3% ▼ 2.1% ▼ 6.3% construction Cost of service ex. IC 13,217 12,693 11,309 ▼ 14% ▼ 11% 26,921 24,002 ▼ 11% Total SG&A 4,876 8,095 6,460 ▲ 33% ▼ 20% 9,552 14,555 ▲ 52% NPAT 9,849 8,073 9,596 ▼ 2.6% ▲ 19% 19,746 17,669 ▼ 11% EBITDA 18,068 13,415 17,012 36,141 30,427 ▼ 5.8% ▲ 27% ▼ 16% EBITDA margin 47.4% 36.0% 46.6% 45.9% 41.3% ▼ 80bps ▲ 1,060bps ▼ 460bps Normalized EBITDA 18,068 15,623 17,012 36,141 32,635 ▼ 5.8% ▲ 8.9% ▼ 9.7% (Excluded one-time item in 1Q16) Sales margin 2.0% -0.3% 2.3% ▲ 30bps ▲ 260bps 3.1% 0.9% ▼ 220bps Capex 8,883 12,102 11,693 16,048 23,795 ▲ 32% ▼ 3.4% ▲ 48% EPS 3.31 2.72 3.23 6.64 5.94 ▼ 2.4% ▲ 19% ▼ 11% 3
Competitive Landscape and Strategy in 2H16 Scaled led-do down 2G 2G h han ands dset su subs bsidy dy • Acquisition of 900MHz enables 2G service continuity • Extended period for 2G migration Netw Network qu quali ality o on par par or be better causes softened free handset subsidy • Stay competitive to protect market • 900MHz supports both share coverage and capacity for all networks Custo stomer per perception im impr provement • Continue to invest in new technology and innovation • Focus on valuable product • Target 4G to cover 80% of proposition in mid- to high-tiered pop. coverage by end-2016 segments while ensuring best customer experience • Endorse “digital lifestyle” through branding 4
Network Quality Highly Enhanced (i) 10MHz 1800MHz 4G Quickly rolled out while ensuring best customer experience 900MHz 5MHz Currently covering 50% of population, targeting 80% by end-2016 Drive Test Average all regions AIS Others 4G Average DL Throughput (Mbps) AI AIS Ot Othe hers 15.8 15. 11. 11.5 Mbps Mbps BKK Central East North Northeast South 4G Average UL Throughput (Mbps) Ot Othe hers AI AIS 7.6 .6 6.2 .2 Mbps Mbps BKK Central East North Northeast South Data as of Jun-16 5
15MHz Network Quality Highly Enhanced (ii) 2100MHz 3G Coverage strengthened by 900MHz 900MHz 5MHz AIS: 89% Other: 74% Other: 86% Good coverage Bad coverage 6
Handset Subsidy scaled down from acquiring 900MHz license Scaled-down handset subsidy campaign remains to protect market share, encourage pre-to-post and migrate 2G to 3G/4G. Handset Subsidy 6 mn subs migrated to 3G since December 5 2015 4 3.4 3 1.6 Total handset subsidy spending on 1H16 is 2 Bt 5 bn 1 0 1Q16 2Q16 5.7 mn remaining 2G subscribers Value (Billion Bt) 7
Fixed broadband: ramping up after building service foundation in 2015 Cover 2.6 mn homepass AIS Fibre Subscribers (subs) in 15 provinces 115, 115,000 000 74,000 • ‘Net Hor’ for students living in dorms 44,000 • To serve a new niche prepaid market 26,000 12,000 2Q15 3Q15 4Q15 1Q16 2Q16 Power Home package starts at Bt590 with 10% discount for AIS’s customers 15/5 20/7 50/10 Max speed (download/upload) Mbps Mbps Mbps New customers (baht/month) 590 750 888 AIS postpaid subscribers 531 675 799 get 10% discount (baht/month) 8
Digital Contents: Capture Opportunities with AIS Business Cloud MO MOBIL ILE VIDEO EO GA GAME CL CLOUD UD M2M MONEY EY AIS Business Cloud with a vision to be Thailand's Leading Cloud Service Provider Tar arget et : business customers of all sizes with • (1) Nationwide 4G and fibre network, (2) AIS’s best in country, state-of-the-art data center facilities, (3) Best-in-class cloud software including the microsoft 365, Vmware NSX, NetAPP, Check Point and many more, (4) Professional manage service teams to enable AIS to be end-to-end single service provider. Oppor portuni nity ty : to expand AIS to the new revenue stream • under digital business for B2B and B2B2C in every industry. 9
Guidance (revised) 1H16-Actual 2016 Revised -0.8% Service revenue (ex IC) Slightly increase (revised up from flat) Handset sales -25% YoY Decline (revised down from flat) 0.9% Handset margin negative margin (revised down from 3-4%) 41.3% EBITDA margin 38-39% (revised up from 37-38%) Bt23.8bn CAPEX Bt40bn (maintained) N/A Dividend Maintain 100% payout ratio 10
APPENDIX 11
Marking the leading position and customer’s perception with the best quality network Curre rent Stat atus Ban andw dwidt dth Fully deployed 3G • 2100MHz Over 98% population coverage • 15MHz License until 2027 32, 32,000 000 3G base stations • (small cells included) Fully deployed 4G • Reached 50% 50% population coverage 1800MHz • 15MHz (target 80% by year end 2016 ) License until 2033 15, 15,500 500 4G base stations • Deployed 5M 5MHz for 2G • 900MHz 10MHz Deployed 5M 5MHz for 3G/4G • License until 2031 Over 98% population coverage on 2G • Accelerating 4G network rollout Exceeded 14,000 base stations target • (base stations) New spectra helps strengthen network quality • 15,500 especially speed & coverage 1800MHz license granted 10,000 Quick 4G network rollout is critical to gain • 7,000 customers’ perception as “ The Best Network 4Q15 1Q16 2Q16 Provider” 12
Mobile: increasing data usage to drive revenue growth Smartphones and 4G phones Growing active data users Accelerating VoU Growing active data users are more popular due to affordable prices Smartphone Penetration (on total base) Postpaid prepaid Postpaid 68% 67% 2.4GB data users 63% VO VOU GB/sub/mth 76% (2Q16) postpaid 4Q15 1Q16 2Q16 Total postpaid 3.4GB 5.8 mn subs 4G handsets on AIS customer base = 7.5 mn subs Prepaid Prepaid data users Attractive pricing helps boost data usage 53% Mobile data revenue Bt14bn Total prepaid +25% YoY 33.5 mn subs (contributing 45% of service revenue ex. IC in 2Q16) 13
2Q16 Revenue Breakdown Voice revenue Non-voice revenue IR revenue (Bt bn) (Bt bn) (Bt mn) -18% YoY +20% YoY -17% YoY +20% YoY -5.4% YoY -13% YoY -5.3% QoQ +4.6% QoQ +5.6% QoQ 32 30 27 25 16 14 16 13 15 13 1,189 1,125 663 547 578 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 • Declining trend in voice usage as • Growing data usage driven by • QoQ growth driven by outbound substituted by data consumption 3G/4G adoption and smartphone roamers during holiday season penetration • Declined YoY from 2G shutdown FBB & other revenues Sales margin Net IC (Bt bn) (Bt mn) (Bt mn) % margin +11% YoY +3.0% YoY -57% YoY -57% YoY +3.1% +0.9% +2% +2.3% +1.6% QoQ -9.3% QoQ 438 97 -0.3% 114 117 412 198 179 -17 2.3 2.4 94 85 1.1 1.2 1.2 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 • YoY declined from IC rate • Normal handset sales remained • Increased YoY mainly from growth adjustment starting 3Q15 positive margin in fixed broadband subscribers • QoQ dropped due to lower IC • Less handset sales due to more revenue while cost maintained subsidy in the market 14
2Q16 Cost Breakdown Regulatory fee D&A Network Opex (Bt bn) (Bt bn) (Bt bn) -42% YoY -19% YoY +34% YoY -22% YoY +20% YoY -16% YoY -52% QoQ +11% QoQ +23% QoQ 11 8.1 6.8 8.4 4.7 5.7 3.8 4.6 2.2 5.4 4.0 4.4 2.3 2.5 3.1 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 • Increased QoQ from network • Increased YoY and QoQ from • Decreased QoQ from one-time USO expansion 4G rollout and enhancing 3G fee in 1Q16 or normalized -6.7% QoQ • Decreased YoY due to fully- capacity • Accounted for 7.4% of service amortized 2G assets revenue (ex IC) Marketing Admin & Staff Bad debt (Bt bn) (Bt bn) (Bt mn) % to postpaid revenue +92% YoY +177% YoY +4.0% YoY -3.1% YoY 3.2% 3.8% 3.0% 3.7% -39% QoQ +11% QoQ 8.2 2.9% 690 604 5.7 5.6 5.1 3.1 3.0 359 284 320 2.8 2.6 2.9 1.6 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 2Q15 1Q16 2Q16 1H15 1H16 • Increased YoY from channel • Bad debt compared to postpaid • Handset subsidy increased YoY but dropped QoQ. expansion and QoQ from revenue is in manageable level. • Subsidy was Bt3.4bn in 1Q16 and adjustment of staff cost in 1Q16 Bt1.6bn in 2Q16. 15
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