Transcript Agenda - True Corporation

3Q 2002
Investor Presentation
November 20, 2002
Agenda
 TA operational highlights and achievements
 Financial highlights & successful bond offering
 TA Orange
 Strategic issues
 Q&A
2
Performance : TA standalone - YTD
EBITDA
Unit : THB millions
14% Growth
Revenue
Expense
7,340
9% Growth
15,292
5% Growth
6,415
7,953
13,997
Jan-Sep 01
Jan-Sep 01
Jan-Sep 02
Jan-Sep 02
7,582
Jan-Sep 01
Jan-Sep 02
3
Performance : TA conso. - YTD (Excl. BITCO)
EBITDA
Unit : THB millions
20 % Growth
Expense
Revenue
9,072
14% Growth
17,354
9 % Growth
7,582
15,211
8,281
7,630
Jan-Sep 01
Jan-Sep 01
Jan-Sep 02
Jan-Sep 02
Jan-Sep 01
Jan-Sep 02
4
Performance : TA conso. - YTD (Incl. BITCO)
EBITDA
Unit : THB millions
Revenue
-3 % Growth
Expense
49 % Growth
23% Growth
18,728
7,582
7,358
11,369
15,211
7,630
Jan-Sep 01
Jan-Sep 01
Jan-Sep 02
Jan-Sep 02
Jan-Sep 01
Jan-Sep 02
Source: TA Financial System
5
Performance: subscriber growth
POTS
15% Growth
1,714,246
1,968,857
PCT
29% Growth
632,630
490,055
UBC
9% Growth
389,685
Sep 01
Sep 01
Sep 02
423,986
Internet
60% Growth
Sep 01
248,136
154,785
Sep 02
Sep 01
Sep 02
DDN
56% Growth
6,773
4,320
Sep 02
Sep 01
Sep 02 *
* Including ~ 250 circuits which have not yet
been billed due to incomplete billing process
6
Performance : revenue growth
9M01
%
9M02
%
%Growth
11,558
76%
12,107
65%
5%
304
2%
894
5%
195%
1,949
13%
2,231
12%
15%
0
0%
798
4%
NM
Multimedia
655
4%
667
4%
2%
Internet
107
0.7%
161
0.9%
51%
Others
194
1%
889
5%
357%
14,766
97%
17,746
95%
20%
445
3%
981
5%
121%
15,211
100%
18,728
100%
23%
Revenue Profile
Wireline
DDN
Wireless
- PCT
- TA Orange
Revenue from service
Product sale
Consolidated revenues
* Normalized figures
7
Key corporate performance
Items
Jan-Sep 01
Jan-Sep 02
• Happy Customer Index
88.5%
• Complaints per 1,000 bills
32
• Churn Rate
5.5%
7.2%
• Net Connect (K lines)
182
214
• Fault Rate
1.4%
1.2%
• Fault Clear (within 24 hours)
99.4%
99.8%
• Call Completion
61.5%
64.1%
• Productivity (EBITDA/employee)
1.6 MB
1.8 MB
87.0%
15
8
Achievements to date
 Completed debenture offering and rights
 Launched new service
-
business broadband solution
 TA Orange subscriber surpassed 1 million
 AMDOCS system implemented
 Adopted TA Code of Conduct for staff
 Won Corporate Governance and Disclosure Awards
9
Agenda
 TA operational highlights and achievements
 Financial highlights & successful bond offering
 TA Orange
 Strategic issues
 Q&A
10
9M02 income statement summary
Excluding BITCO
THB millions
9M02
9M01
% chg.
Revenues
17,354
15,211
14
Cash operating expense
(8,281)
(7,630)
9
(2,699)
(2,367)
14
9,072
7,582
20
(6,388)
(5,879)
9
2,685
1,703
58
(2,695)
(3,713)
(27)
Tax
(117)
(56)
107
Income from continuing operations
(126)
(2,067)
94
Share of losses in associates
(309)
(614)
50
Net income from continuing operation
(435)
(2,681)
84
Non recurring items & others
(6,360)
(488)
(1,203)
Net profit (loss)
(6,795)
(3,170)
(114)
Revenue sharing
EBITDA
Depreciation and amortization
Operating profit
Interest expense – net
* Normalized figures
11
3Q02 income statement summary
Excluding BITCO
THB millions
3Q02
3Q01
% chg.
Revenues
5,776
5,141
12
(2,824)
(2,610)
8
(918)
(801)
14
2,952
2,531
17
(2,162)
(2,009)
8
790
522
51
(898)
(1,136)
(21)
(17)
(22)
(24)
Income from continuing operations
(124)
(636)
80
Share of losses in associates
(110)
(80)
(37)
Net income from continuing operation
(234)
(716)
67
Non recurring items and others
(1,195)
196
(708)
Net profit (loss)
(1,429)
(521)
(174)
Cash operating expense
Revenue sharing
EBITDA
Depreciation and amortization
Operating profit
Interest expense – net
Tax
* Normalized figures
12
Strong growth in EBITDA and EBITDA margin
Quarterly consolidated EBITDA



THB billions
3Q02/3Q01 consolidated EBITDA growth
– With BITCO
-6%
– Without BITCO
17%
Key components of 3Q02/3Q01 EBITDA
growth (without BITCO)
– revenue growth of 12%
– EBITDA margin +190 bps to 51.1%
W/o BITCO
3,138
2,982
2,570
2,481
2,500
1Q01
2Q01
3Q01
2,952
2,665
4Q01
1Q02
2Q02
3Q02
Quarterly consolidated EBITDA margin
9M02/9M01 consolidated EBITDA growth
– With BITCO
-3%
– Without BITCO
20%
W/o BITCO
54%
53%
46%
1Q01
2Q01
49%
49%
3Q01
4Q01
1Q02
52%
2Q02
51%
3Q02
13
Core wireline and data businesses continued to make profits
Normalized net income (loss) from ongoing operations - excl. share of gain (loss)
in subsidiaries and affiliates & non recurring items (on stand-alone basis)
129
THB millions
78
52
-199
-308
-373
-481
-485
-609
-667
-714
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
14
Balance Sheet substantially improved in October 2002
 Completed debenture offering and IFC C - Loan, to repay 85% of USD debt
 Current USD exposure is US78 mn
 Completed rights offering, raising THB3 bn in proceeds to increase investment in TA
Orange to 44% from 41%
– The rights offering doubled equity base to approximately THB6 bn
 Completed first phase of debt restructuring of TH& subsidiaries in September 2002
–
Prepayment of loans over THB1 bn to creditors
 Total prepayment of loans in 2002 YTD was THB1,584 mn
15
Transformed Balance Sheet and Cash Flows
Key financial ratios (excluding TA Orange)
Net Debt/ EBITDA
EBITDA/ interest coverage
3.3
2.2
9.9
10.0
1.7
7.3
6.6
1.3
5.8
0.8
1998
1999
2000
2001
9M02
1998
1999
2000
2001
9M02
US Dollar exposure
Cash flow from operations
THB Mn
6,041
USD Mn
1,021
855
4,479
809
591
3,229
1,353
78
152
1998
1999
2000
2001
2002*
* Annualized
1998
1999
2000
2001
Oct-02
16
Successful bond offering
 Successfully placed THB18.5 bn in new debentures
 Tranche 1 of THB11.7 bn
–
the second largest BBB+ or lower debentures this year was THB3.5 bn
 Tranche 2 (IFC partial guaranteed debentures) of THB6.75 bn
–
–
the first Thai debenture with a third party partial guarantee
sold out THB6.75 bn the first day
 Combined tranches were :
–
–
the largest telecom debentures ever in Thailand
the largest rated debentures ever in Thailand
 US$ exposure reduced by 85%
17
Agenda
 TA operational highlights and achievements
 Financial highlights & successful bond offering
 TA Orange
 Strategic issues
 Q&A
18
TA Orange launch momentum maintained
 874,000 subscribers end September 2002, currently 1.1m active
subscribers
– Fastest ever GSM network to 1.0 million subscribers
– 52% postpaid, 48% prepaid (as at end Q3 2002)
 High quality network
– 100% network coverage BMA, 75% national coverage
– On target for 90% population coverage by year-end
 Enthusiastic reception for the Orange brand
– Brand awareness 93%
– 65% of customers rate after sales service excellent or good
 Real product innovation
– Thai SMS II (Nov 15th)
– Per second billing
19
Large growth potential remains in the Thai market
 The Thai mobile market will continue to expand, driven by increased competition,
improving network coverage and quality, and more innovative products:
–
–
Mobile penetration rates will double exceeding 50% by end 2005
New non-voice data revenue streams look set to explode driven by SMS/EMS
Data as a % ARPU 1H02
5
3
3
3
2
1
1
Hong Kong
Taiwan
Indonesia
China
Malaysia
Thailand
7
Korea
Euroland
Philippines
12
Singapore
40
Sources: World Bank, Deutsche Bank, ING, Asiacom
20
The competitive dynamics are changing
 SIMs and handsets increasingly bought separately
 Overall churn will increase as consumers can use any SIM with any handset
 More than 70% of growth in 2003 will be from UPC
 Prepaid will continue to dominate
21
TA Orange strategy
•
Attracting and retaining the highest value customers
• Best quality network
• Best customer service
• Innovative products
• Best value
• Targeted offers
•
Leveraging the Orange brand & brand values
• Distinctive positioning and communications
• Award-winning execution
• Unique team culture
•
Maintain competitive cost structures
• Exploit cost synergies with CP and TA
• Exploit cost synergies with Orange SA
22
TA Orange’s active subscriber base continues to grow
 TA Orange’s market share of net
Subscriber development
Thousands
Prepaid
Postpaid
874
adds in Bangkok estimated at
20% in Q3
454
733
618
500
421
338
 TA Orange’s cumulative market
441
share 6%
438
402
357
420
286
292
Sep
Aug
May
98
Jul
64
Jun
52
Apr
180
23
Growth driven by continued improvements in coverage

Still on target for 90% GDP
population coverage by December
2002.
24
Approximately 50% now coming from UPC
Activations by region
%
BMA
UPC
10 24 32 26 29 33 38 41 47 53
90
10-Oct
3-Oct
26-Sep
19-Sept
12-Sept
5-Sept
1-Sept
25-Aug
18-Aug
11-Aug
76 68 74 71
67 62
59 53
47
25
Average Revenue per User continues to improve
Postpaid monthly ARPU
115
Prepaid monthly ARPU
190
10% growth in Q3
85% growth in Q3
180
110
170
160
105
150
140
100
130
120
95
110
Re-based to 100 in June-02
Sep
Aug
July
90
June
Sep
Aug
July
90
June
100
26
Blended ARPU’s - maintaining value share in Q3
Monthly ARPU
THB
700
650
600
550
500
450
400
April
May
June
Orange
July
AIS
August
September
DTAC
Orange & AIS ARPU monthly , DTAC 3Q estimated
27
TA Orange has retained its postpaid customers
Postpaid churn – Q3 (monthly
EoP
est)
Sep*
250
219
193
200
Market postpaid
6.0%
Market prepaid
0.9%
150
100
101
Orange (underlying)
82
50
0
Ambassador
Postpaid
4.8%
Prepaid
1.0%
TA
* excludes suspended and disconnected accounts
28
Acquisition costs in rapid decline
SAC
120
 SAC’s rapidly declining
100
 SAC’s down 87% since April
100
driven by growth in SIM-only
sales
80
79
60
57
40
28
20
13
13
Aug
Sep
0
April
May
June
July
29
SIM-only a huge opportunity for TA Orange
TAO % of sales from SIM - only
 No SACs means reduced
90%
77%
80%
70%
74%
59%
60%
 Increased opportunity to sell to
50%
40%
15m existing AIS & DTAC
users who already own a
handset
31%
30%
risks, improved cashflows and
immediate payback
20%
10%
0%
0%
0%
Apr
May
Jun
Jul
Aug
Sep
30
Ideally positioned
“to become the leading wirefreeTM operator in the Thai market”
–
–
–
–
–
best network
best customer service
internationally proven brand & brand values
proven innovation skills
complementary partner strengths
31
“the futures bright, the future’s Orange”
32
Agenda
 TA operational highlights and achievements
 Financial highlights & successful bond offering
 TA Orange
 Strategic issues
 Q&A
33
Key concerns
 POTS and PCT ARPU
 PCT subscriber base
 Fair regulatory regime
34
ARPU for wireline and PCT expected to level off as mobile
penetration in BMA reaching its peak
With BMA mobile penetration rate decelerating,TA POTS and PCT ARPU should begin to stabilize
Mobile Penetration Rate in
BMA
100%
Baht/Mth/Sub
800
90%
700
POTS ARPU
80%
600
70%
500
PCT ARPU
60%
400
50%
40%
300
30%
200
Projection
20%
Mobile Penetration in
BMA
100
10%
0
Jan-00
0%
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Source: Merrill Lynch, Billed Revenue TA, CSN market survey (July 2001),Customer Satisfaction Survey (April 2002).
35
PCT subscriber base
PCT subscribers decreased in 3Q02 due mainly to the termination of free handset promotions and focus
on high-ARPU customers
627
364
255
393
431
453
219
229
1Q2000
2Q
555
289
334
364
3Q
4Q
1Q2001
2Q
TelecomAsia
670
633
490
274
309
644
260
621
592
1Q2002
2Q
3Q
408
3Q
4Q
TOT
36
Agenda
 TA operational highlights and achievements
 Financial highlights & successful bond offering
 TA Orange
 Strategic issues
 Q&A
37
3Q 2002
Investor Presentation
November 20, 2002
“Safe Harbor” Statement
This presentation contains statement about expected future events and financial
results that are
forward-looking and subject to risks and uncertainties. For those
statements, we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 Discussion of factors
that may affect future results is contained in our recent filings with the Securities and
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