Transcript No Slide Title

2Q 2001 Earnings
Analyst Conference
20th August 2001
Analyst Meeting : August 20, 2001
1
Outline
 Highlighted Issues
 TA’s sales & revenue strategy/
Market competitiveness
 Regulatory environment
 Organization strategy
 CP Orange
 Financial Results and Financial Risk
Reduction Strategy
 Summary
Analyst Meeting : August 20, 2001
2
TA’s Sales & Revenue Strategy/
Market Competitiveness

High Capacity Utilization

Business / Data Market Leader
Analyst Meeting : August 20, 2001
3
High Capacity Utilization Strategy
Why
To accelerate the
utilization of the
remaining 900K lines
capacity already
invested in
Analyst Meeting : August 20, 2001
How

by lowering barrier
to entry for all
potential customers

by targeting
promotions that
have a short
payback period on
customer
acquisition cost

by launching high
impact promotion
campaigns that
stimulate demand
What

free installation
promotion

product bundling
promotions
4
High Capacity Utilization Strategy
Net Additions (TA vs. TOT)
140,000
120,000
120,000
100,000
100,000
80,000
80,000
60,000
60,000
40,000
NET ADD 2000
NET ADD 2001
CUMULATIVE 2000
CUMULATIVE 2001
20,000
40,000
20,000
0
0
Jan Feb Mar Apr May Jun Jul
Aug Sep Oct Nov Dec
Net Additional Lines (lines per quarter)
140,000
Cumulative Net Add
Net Add
Net Additions (1H 2001 vs FY 2000)
90,000
71,074
75,000
52,654
60,000
45,000
25,539
31,829
31,313
30,000
15,000
0
TOT
TA
-15,000
Q2'00
Q3'00
Q4'00
Q1'01
April-May 01
1H 2001 Net Additions of 138,780 Surpassing FY 2000
Analyst Meeting : August 20, 2001
5
High Capacity Utilization Strategy
Effect on ARPU : Better Customer ARPU Ramp-Up Compared to Last Year’s
Customer ARPU Ramp-Up (POTS+PCT)
Takes 4 mths to
reach steady state
ARPU for new added
1,000
subscribers in 2001
ARPU (Bt./month)
800
600
400
New Subs in Jan 2001
200
New Subs in Jan 2000
0
1st bill
2nd bill
3rd bill
4th bill
5th bill
6th bill
Customer Bill No.
Analyst Meeting : August 20, 2001
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High Capacity Utilization Strategy
ROIC / ARPU – Wireline + PCT
• ARPU (Wireline+PCT) up 2.6% YoY
• ARPU (Wireline only) dropped 4.3% YoY
788
755
794
770
761
781
729
662
659
657
2Q
20
01
691
1Q
690
3Q
665
687
1Q
3Q
2Q
19
99
1Q
4Q
3Q
2Q
1Q
19
98
651
673
2Q
624
4Q
641
20
00
635
638
4Q
659
Baht / Customer / Month
Analyst Meeting : August 20, 2001
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High Capacity Utilization Strategy
Results of Strategy

Expanded customer base across both business and residential
segments

TA’s net add substantially exceeds TOT’s BMA net add

Capacity utilization strategy has had no negative impact on ARPU

Increase in churn is a natural, industry-wide phenomenon

One time increase in customer acquisition cost, but will be
recovered within a short period of time (~ 6 months)

The negative effects of intensified competition have been offset by
the positive results of the Capacity Utilization strategy
Overall, the Capacity Utilization Strategy Has Yielded Favorable Results
Analyst Meeting : August 20, 2001
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High Capacity Utilization Strategy
For 2H 2001, our sales strategy will focus on:


differentiating TA Group’s products via product bundling

POTS + PCT (lend PCT handsets for 3 years)

POTS + Internet access (ClickTA, TA Express, and affordable
PC’s)

POTS + CPO mobile + PCT
extending the lowered barrier to entry promotions
Analyst Meeting : August 20, 2001
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Business / Data Market Leader
TOT’s high Business:Consumer revenue mix (>55%) implies that TA
has significant room to grow in the Business segment
Consumer:Business Revenue Mix
TA
2Q 2001
FY 1999
Consumer
<45%
Consumer
53%
Business 47%
Consumer
50%
Business
>55%
Business 50%
Source:TelecomAsia - BD/PD
Analyst Meeting : August 20, 2001
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Business / Data Market Leader
Progressing Towards Business Segment Leadership

Reorganized Business & Enterprise dept. to be nimble by reducing
layers and expanding span of control

Brought in ex-GM of Dell Computers Thailand to head Business &
Enterprise

Further segmenting the business market by establishing Strategic
Accounts and Strategic Buildings sales units

Positioning to be the first mover in the emerging wholesale market
segment

Developing special packages targeting the low-key, but potentially
high ARPU SME and SOHO segments

Created “Biz Center” dedicated to serving key business customers
Analyst Meeting : August 20, 2001
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Business / Data Market Leader
Digital Data Network; a basic and high-growth data service
Cumulative Circuit Billed (1999-2001)
DDN Revenues (1999-2001)
Circuit
Bt Mn
5,000
110
4,300
3,947
3,515
3,600
4,137
93
3,711
79
2,936
70
2,628
2,030
2,097
57
50
1,968
46
51
42
426 net circuit billed in first half 2001,
11.5% growth from YE 2000
Analyst Meeting : August 20, 2001

2Q
01
1Q
01
4Q
00
3Q
00
2Q
00
1Q
00
4Q
99
3Q
99
1Q
99
2Q
01
1Q
01
4Q
00
3Q
00
2Q
00
1Q
00
4Q
99
3Q
99
30
2Q
99
1Q
99
1,500

101
73
2Q
99
2,200
98
90
3,184
2,900
96
Revenues continue to grow due to
focus on high-bandwidth customers
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Business / Data Market Leader
Leased Line or DDN Market Shares by No. of Links in greater BKK
2001
1997
Others
6%
DATANET
27%
TA
17%
UIH
20%
Source : IDC
TOT
17%
CAT
13%
ADC
Others
(Datanet)
9%
5%
TOT
35%
TA
26%
UIH
21%
Source : NIDA School of Applied Stats, 2001

Focus on high bandwidth, high margin market

Solution based & consultation approach
Analyst Meeting : August 20, 2001
CAT
4%
13
Business / Data Market Leader
TA Broadband Services & FY 2001 Target Customers
Complete Broadband Solutions
 ADSL
 Cable Modem
Other Data & Internet Services
 ISP Wholesale Ports
 Internet Dial-up
Analyst Meeting : August 20, 2001
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Business / Data Market Leader
Broadband Service Development

Access & Basic Infrastructure

Wholesale & Content Infrastructure Development e.g. IDC

Gigabit Ring/Internet Xchange

e-Commerce Development

MAP, Content Aggregation Development
Analyst Meeting : August 20, 2001
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Regulatory Environment

Telecom Business Act

NTC

TOT Privatization vs.
Concession Conversion
Analyst Meeting : August 20, 2001
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Regulatory Environment
Telecom Business Act

Draft of Telecom Business Act has passed the Cabinet.
The draft Bill is now at Senate’s Standing Committee on
Communications


Assurance for TA to be awarded with License
Mechanism to convert the Concession
NTC

Senate rejected the proposed NTC. The issue was submitted to
The Juridical Council by the Permanent Secretary Attached to
The Prime Minister Office.
Analyst Meeting : August 20, 2001
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Regulatory Environment
TOT Privatization and Concession Conversion

The government is encouraging the privatization process to
be finished by YE2001.

State Enterprise Policy Committee has appointed the new
Concession Conversion Sub-committee.
The Sub-committee appointed Chulalongkorn University as
advisor and to conduct the study on the Concession
Conversion framework.
Analyst Meeting : August 20, 2001
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Organization
Strategy

Management Level vs. Competency (De-Layering)

Regulatory Function

Internal Audit / Risk Management

Innovation & Profit Oriented Organization
Analyst Meeting : August 20, 2001
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CP Orange
Remark : CP Orange slides are excluded from this handout.
Analyst Meeting : August 20, 2001
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Financial Results & Financial Risk
Reduction Strategy
Analyst Meeting : August 20, 2001
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2Q 2001 Results
Total Revenues
11% Growth
In MB
Core Operating Expenses
17% Growth
5,089
4,566
In MB
1,532
1,313
2Q 2000
2Q 2000
2Q 2001
EBITDA
2Q 2001
Net Additions - Wireline
In MB
5% Growth
2,390
2,505
Subs.
165% Growth
67,706
25,539
2Q 2000
Analyst Meeting : August 20, 2001
2Q 2001
2Q 2000
2Q 2001
22
1H 2001 Results
Total Revenues
Core Operating Expenses
In MB
11% Growth
10,070
9,046
In MB
17% Growth
2,943
2,508
1H 2000
1H 2001
1H 2000
EBITDA
5% Growth
1H 2001
Net Additions - Wireline
In MB
5,068
Subs.
129% Growth
138,780
123,847
1H 2001
FY2000
4,812
60,705
1H 2000
Analyst Meeting : August 20, 2001
1H 2001
1H 2000
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2Q 2001 & 1H 2001 Results
Revenue Profile
%
1H’01
1H’00
3,648
5
7,594
7,103
7
3,331
3,255
2
6,596
6,362
4
500
393
27
998
741
35
833
526
58
1,636
1,195
37
Usages
683
375
82
1,311
751
75
Handset Sales&Others
150
151
-
325
444
(27)
Data Communications
101
78
29
199
151
32
Broadband/Internet
258
240
8
507
479
6
66
74
(10)
134
118
14
5,089
4,566
11
10,070
9,046
11
Unit: THB Million
Core Wireline-Voice
Basic Wireline-Voice
Value Added Services
Wireless
Others
Total
Analyst Meeting : August 20, 2001
2Q’01
2Q’00
3,831
Chg
%
Chg
24
2Q 2001 & 1H 2001 Results
Operating Expense Profile
Unit: THB Million
“Core” Opex
Personnel Expenses
Network Expenses
Selling & Promotions
Others
2Q’01 2Q’00
%
1H’01
1H’00
Chg
%
Chg
1,532
550
478
193
311
1,313
479
422
136
276
17
15
13
42
12
2,943
1,084
865
360
634
2,508
963
811
254
480
17
13
7
42
32
798
696
15
1,566
1,370
14
Cost of Sales
Cash Operating Expenses
254
2,584
167
2,176
52
18
493
5,002
356
4,234
38
18
Depreciation & Amortization
1,940
1,918
1
3,870
3,795
2
Total
4,524
4,094
10
8,872
8,029
11
Revenue Sharing
Analyst Meeting : August 20, 2001
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2Q 2001 & 1H 2001 Results
EBITDA Margin
2Q’01 2Q’00
Revenue
EBITDA
EBITDA margin (%)
5,089
2,505
49.2
4,566
2,390
52.3
Product sale margin (%)
(51.5)
8.6
52.7
54.2
Normalized
EBITDA margin (%)
Analyst Meeting : August 20, 2001
Diff
1H’01 1H’00
(310 bp)
10,070
5,068
50.3
(39.1)
(150 bp)
53.6
Diff
9,046
4,812
53.2 (290 bp)
26.6
54.7 (110 bp)
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2Q 2001 & 1H 2001 Results
Cash Flow Highlights
Unit: THB Million
Cash flows from operations
2Q’01 2Q’00
%
Chg
1H’01
1H’00
%
Chg
1,459
657
122
2,540
1,371
85
Less Capital expenditure
942
505
87
1,345
775
74
Free cash flow
517
152
240
1,195
596
101
Analyst Meeting : August 20, 2001
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2Q 2001 & 1H 2001 Results
EBITDA/ Interest Coverage
Debt / EBITDA
15.8
1.96
13.8
1.68
10.4
10.6
1.26
7.9
7.5
0.46
1996
1997
1998
1999
2000
30 June 01
1996
Cash Flow from Operations
85% Growth
2,540
1,371
Analyst Meeting : August 20, 2001
1H 2001
1997
1998
1999
2000
30 Jun 01
Consolidated Debt Profile
US$
In MB
EOY 2000
796
30 June 2001
787
Change
1H 2000
0.75
0.66
(9)
YEN
Baht
42,746
23,387
42,609
(137)
Equiv. Baht
23,131
(256)
75,178
74,479
(699)
Remark : FX rates as of 30 June 2001
28
1H 2001 Results
Results - Actual vs. Target
2001 % G
1H01(A)
1H00(A)
%G
(Target)
10,070
9,046
11
14-18
EBITDA (MB)
5,068
4,812
5
10-14
Line billed (thousand lines)
1,664
1,462
14
14-19
ARPU POTS (Bt/line/mth)
659
680
(3)
0-(5)
PCT subs (thousand)
453
274
65
> 40
ARPU PCT (Bt/sub/mth)
465
470
(1)
~ Flat
CAPEX (MB)
1,345
775
74
35-40
Headcount (persons)
5,510
5,040
9
8-12
Revenue (MB)
Analyst Meeting : August 20, 2001
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Financial Risk Reduction Strategy
 Foreign exchange risk exposure will be reduced through:
 P
r
 C
e
u
p
r
a
y
r
m
e
e
n
n
t
c
o
f
y
l
s
o
w
a
n
s
a
p
 Local debenture
 Capex funded by internal cash flows policy
 Committed to enhance corporate governance
 International standard of disclosure via IAS
Analyst Meeting : August 20, 2001
30
Summary
Analyst Meeting : August 20, 2001
31
Summary
Revenue
1.
Capacity utilization
2.
Need to expand into new area of revenue/data & broadband
(including wholesales)
3.
Need to aggregate and bring customers and contents together in order
to increase usage and, thus, ARPU
4.
Ability to offer and deliver access solutions to customers by segments
5.
Nationwide network solution capability
6.
BKK market
7.
Voice market will be very competitive. There will be more overlapping
among wireless and wireline. However, the market will be expanding.
What we need to ensure is for among the operators to understand and
share the sense of not to destroy the market value
Analyst Meeting : August 20, 2001
32
Summary
Financial
1.
2.
Lower debt (USD), Improve Debt/Equity ratio
Expand EBITDA
Regulatory
3.
Push for formation of NTC and concession conversion
4.
Tariff rebalancing
CPO
5.
Successful launch / 1m. subs.
6.
Maximize synergistic value between TA and CPO
Analyst Meeting : August 20, 2001
33
Summary
From Product Focus to Customer Focus
Current
Transition
Future
Broadband Access
Access Solution
Provider
Data / Internet
ATM / IP Network
Wireless
•
•
•
•
•
•
POTs
PCT
International Call
Public Phone
Digital Data Network
Value Added Services
Product Offering
Analyst Meeting : August 20, 2001
Nationwide
Broadband
Backbone
Network
Wholesales
VAS
Application and Content
Wholesales /
aggregator
Outsourcing Services
Platform Integration
Solution Provider
34
Thank You
Analyst Meeting : August 20, 2001
35
“Safe Harbor” Statement
This presentation contains statements about expected future
events and financial results that are
forward-looking and
subject to risks and uncertainties. Undue reliance should
therefore not be placed on said forward-looking statements,
which speak only as of the date hereof. Factors which may
affect future results of the Company are discussed in our
recent filings with the Securities and Exchange Commission.
Analyst Meeting : August 20, 2001
36