dtac has built a good foundation for growth

28 January 2019 – dtac was completely out of concession regime when the remedy period ended on 16 December 2018. With the partnership with TOT on 2300MHz wireless service, the acquisition of 1800MHz and 900MHz spectrums from the auctions in 2018, and the existing 2100MHz spectrum, dtac has a strong and competitive spectrum portfolio, with the largest downlink bandwidth in the market. The lease agreements with CAT provide long-term access to towers and other network infrastructure. Moreover, high level of network investment to expand 2100MHz and 2300MHz networks helped to strengthen network coverage and capacity, and improve customer’s experience. This reduces business uncertainty and provides a good foundation for dtac to return to growth in 2019.

Furthermore, dtac’s legal risk pertaining to the concession agreement greatly reduces from the disputes settlement agreement, which is subject to an approval from the Annual General Meeting of Shareholders, to be held on 4 April 2019.

At the end of 2018, total subscriber base stood at 21.2 million, all of which were registered under DTN, a subsidiary holding the 2100MHz, 1800MHz, and 900MHz licenses. In addition, the expansion of ‘dtac Turbo’ network was well ahead of target, with approximately 12,700 base stations installed by the end of 2018. Densification of 2100MHz network continued to add more coverage and capacity. Overall network coverage stood at 94% of total population.

Key financial results were in line with the full year guidance. Service revenues excluding IC for FY18 declined by 2.8%, while EBITDA margin and CAPEX stood at 37.9% and THB 19.5 billion, respectively. The decline in service revenues was driven by uncertainties surrounding the transition out of concession regime, lower IDD service revenues, the clean up of CPA services to improve customers’ experience, and lower number of tourist arrivals. Moreover, EBITDA (before other items) declined by 6.7%, mainly from higher network OPEX from network expansion and a change in cost structure after end of the concession, e.g. TOT’s 2300MHz network roaming cost, temporary cost of remedy covering a period from 16 September – 15 December 2018, cost of tower and network infrastructure lease from CAT, which was partly offset by a decline in selling, marketing, and general administrative expenses.

As a result of a one-time THB 9.5 billion disputes settlement with CAT, which was partly offset by lower depreciation and amortization expenses after end of the concession, dtac’s FY18 results turned into THB 4.4 billion loss. However, operating cash flow (EBITDA – CAPEX) remained solid at THB 8.9 billion amid a huge investment in the network. Moreover, financial position stayed healthy, with net debt to EBITDA ratio of 1.2x and cash on hand of THB 14.1 billion.

dtac plans to spend a CAPEX of THB 13 – 15 billion in 2019.

Alexandra Reich, dtac’s Chief Executive Officer, said “With the concession regime behind us and a historic year of network investment to expand coverage and capacity on both 2100MHz and 2300MHz networks, we have built a good foundation for future growth and have an ambition to return to growth during 2019, with continued focus on operational efficiency. We will keep on improving network and customers’ experience and rebuilding confidence in dtac brand.”

Dilip Pal, dtac’s Chief Financial Officer, said “dtac’s cost structure changed significantly after end of the concession, of which one of them was temporary – cost of remedy during 16 September – 15 December 2019. Regulatory costs drop sharply due to the cessation of the revenue share payable to CAT. In addition, roaming cost on TOT’s 2300MHz network and expenses for lease of CAT’s towers and network infrastructure commenced in April and September 2018, respectively. Amortization of deferred rights to use assets under concession also ceased to exist from September 2018 and was partly replaced by the amortization of 1800MHz and 900MHz spectrum licenses in December 2019. The change started to have a partial impact on dtac’s operating margin in 2018 and will have a full impact in 2019. In addition, we’d like to take some more time to assess our potential for returning for growth during 2019 and will provide more details outlook for 2019 in the second quarter.”