Advanced Info Service Plc. Investor Presentation September 2015 AIS - - PowerPoint PPT Presentation

Advanced Info Service Plc.

Investor Presentation

September 2015

Breakdown of customers Breakdown of Service Revenue

Investment highlight

AIS at a glance

Breakdown of Revenue Market Share

pre paid 87% post paid 13% Voice 47% Non- voice 44% IR 2% Others 7%

40m users

52% 29% 19%

No.1 mobile operator in Thailand

2G (BTO) 3G (License)

900MHz ended Sept-15 2100 MHz ended Dec-27 1800MHz under remedy period is extended until the auction completed.

8.43 10.9 12.15 12 113% 93% 100% 100% 2011 2012 2013 2014

Dividend payout ratio at 100%

Bt

Strong capital structure

2Q15 Net debt to equity 0.47 Net debt to EBITDA 0.32 ROE 90%

Moving toward licensing scheme 2

Data as of 2Q15

 Largest telecom infrastructure in Thailand  Core element in digital era of “IoT”  New business growth  Driven toward convergence  Operating synergy with mobile business  New source of revenue  Support mobile and fixed broadband business  Partnership model

From Telecom Service Provider to Digital Life Service Provider

Mobile Fixed Broadband Digital Contents

3

Business strategies in 2015

 Continue to enhance network quality for better customer experience by increasing network capacity  More aggressive 3G handset campaigns for achieving 2G subscriber migration, lowering regulatory fee and defending market share.  Offer more variety of on-top packages to serve needs of different customer segments, leading the way to data monetization  Acquire more spectrums to develop the technology and increase capacity  AIS Fibre is in a beginning stage with insignificant contribution expected in the first year, but rather focusing on service quality and installation ramp-up.

4

Continued enhancing network and investing for future capacity

Base stations and towers

AIS WiFi Fiber optics

FY14 2Q15

21,300

23,800

(2,500 small cells)

FY14 2Q15

28,000

38,000

(4,000 SuperWiFi)

Completed

123,000 km

as of Jun-15 Executing 6-sector cell splitting to achieve best capacity efficiency

• Base station
• Towers

(including 13,200 towers under dispute)

19,700

20,500

FY14 2Q15

5

• Offer more handset discounts, with free

airtime,

• free data usage
• AIS LAVA + OLA Pop sold in 2Q15

1.1 mn units

• 77% of subscribers who changed to LAVA

were data users, compared to 36% when before changing.

• New 3G house-branded phone:

AIS LAVA PRO 5.5 and LAVA W1

1H15: 3G device penetration increased led by AIS Super Combo

46% 49% 54% 58% 62% 2Q14 3Q14 4Q14 1Q15 2Q15

3G Handset penetration

• n 2.1GHz-License

35% 36% 39% 44% 49% 2Q14 3Q14 4Q14 1Q15 2Q15

Smartphone penetration

• n 2.1GHz-License

6

2H15: To increase 3G device penetration to 70%

AIS

900MHz-BTO 2100MHz-License

2G Device 3G Device

2.7m 37m 14m 23m

62% penetration

40m

7

AIS handset trade-in campaign

• Target AIS’ existing customers
• Customers can bring their old phone to trade with

AIS OLA POP (feature phone) + Bt200 top-up or AIS LAVA 3.5” (entry level smart phone) at Bt690 As of 2Q15

Paving the way for monetization Expand data users Promote on-top packages Encourage use of application & content Supported by 4G

Data usage increased substantially in the last two years with potential of higher growth from 4G

250 MB

in 1Q13

4G

8

20mn

1H15

17mn

1H14

13mn

1H13 Volume of Usage MB/ data sub/ mth

1,600 MB

in 2Q15

Expiring concession

9

Options to handle remaining 2G customers depending on number of customers on 900MHz Upon concession expiry, remedy period for 900MHz is expected before auction. Ongoing Tower dispute

• Awaiting NBTC’s consideration
• NBTC may impose different approach from

1800MHz remedy.

• To evaluate for feasible options considering

financial impact

• Remaining customers are expected to be 30%
• f total subscribers by end of 2015
• 13,198 towers under dispute
• Case under arbitration
• Ongoing negotiation with TOT to resolve

dispute and build long-term business model

Current nt Bandwid width th Statu tus 2.1GHz license 15MHz 3G service 1800MHz concession 12.5MHz expired since Sep 2013 900MHz concession 17.5MHz expiring in Sep 2015 to be returned New acquisi isitio tion Bandwid width th Plan 900MHz license 10MHz

• ptions depending on

number of subscribers 1800MHz license 12.5 or 15MHz most common for 4G Partnership with TOT for 2.1 and 2.3 GHz available Under discussion

Spectrum strategy

10

Spectrum auction

The IM of 1800MHz auction was announced on the Royal Gazette on 24 August 2015. As for the draft of Information Memorandum of 900 MHz auction, it is under the process of public hearing.

1800 MHz 900 MHz Spectrum packaging Two licenses of Option 1: 2 x 15 MHz or Option 2: 2 x 12.5 MHz Depending on spectrum return from CAT Two licenses of 2 x 10 MHz Starting price Option 1: Bt15.9bn or Bt19.9bn Option 2: Bt13.3bn or Bt16.6bn depending on spectrum return and number of bidders Bt11.3bn or Bt16.1bn, depending on number of bidders Auction method Simultaneous Multiple Round Ascending Auction Validity Until 15 September 2033 (~ 18 years) 15 years Network requirement

• Covering 40% of population within 4 years, and 50%

within 8 years

• Technology neutral
• Covering 40% of population within 4

years

• Technology neutral

Payment

• 1. 50% within 90 days after winner announcement
• 2. 25% at end of year 2
• 3. 25% at end of year 3

Public hearing sessions 27 July and 3 August 11 and 31 August Auction date 11 November ~ 11 November (TBC)

11

4G Readiness: Keep our DNAs work

12

Capital al to support auction

Get 4G

4G Device ready

Reserve price as per IM

• 1800MHz: 13.3bn / license

(12.5MHz) or 15.9bn / license (15MHz)

• 900MHz: 11.3bn / license

(10MHz)

Applica icati tion

• ns

s work

better on 4G

Net debt/EBITDA

1.0 4.7 Asia ex. Japan Europe

2013 2014 2Q15

Multi-band antennae small cells Fiber optic backhaul 100% ready 100% ready 15%

• Live video streaming
• VoLTE, HD voice calls on LTE

AIS

Picture from Qualcom

0.14 0.28 0.32

2015E

2015E from global research

Roll out Networ

• rk quickly
• f 1H15 new handset

sales were 4G-enabled Cheapest 4G handset in 1H15 was approx. Bt5,000 Most of 3G N/W

2.0 US telcos

AIS officially launched Fixed Broadband

• Officially launched on 27th

April: Bangkok, Chiang Mai, Nakhon Ratchasima, Udon Thani, Khon Kaen, Phuket, and Hat Yai

• Special package since August
• ffering three services for AIS

Postpaid customers:

• fixed broadband
• AIS Playbox
• AIS fixed line number

13

14

Fixed Broadband: maintain target with quality focus

11,900

80,000

Jan Feb Mar Apr MayJun Jul AugSep Oct NovDec

Actual Target 2H15

What have we faced in 1H15?

• Intended to penetrate with quality
• Required more skillful teams to

respond to huge demand

Plan in 2H15

• Streamline workflow for service and

installation to ensure quality

• Increase installation workforce
• Quick ramp-up to reach target of 80,000

exponential ramp-up

Capacity 250,000

households

Homespass 1mn

Coverage plan in 2015

Year-end target

• Chiangmai
• Bangkok
• Chonburi
• Udonthani
• Kon kaen
• Korat
• Phuket

28% 37% 32% 3%

Fixed Broadband landscape in Thailand

5mn subscr criber bers

Others Others

7mn subscr criber bers in 5 years

Technology DL Mbps UL Mbps Price /month (Bt) Docsis 15 1.5 599 Docsis 30 3 1,299 Docsis 50 5 2,799 Docsis 100 10 4,999 Docsis 200 15 9,999 Technology DL Mbps UL Mbps Price /month (Bt) ADSL 10 0.512 590 ADSL 15 1 900 VDSL/FTTx 30 3 1,200 VDSL/FTTx 50 10 2,500 FTTx 100 30 5,900 FTTx 200 50 9,900 Technology DL Mbps UL Mbps Price /month (Bt) ADSL 10 1 590 ADSL 13 1 690 ADSL 15 1 990 FTTx 30 3 1,290 FTTx 40 5 2,200 FTTx 50 5 3,500

Key player

15

16

Digital content: new s-curve roadmap

Short-term Medium-term Long-term

Video Game Mobile banking Cloud M2M

29.6 30.3 30.5 58.6 60.8

2Q15 and 1H15 Financial highlights

50.3% 55% 55.4% 51.6% 55.2%

Service revenue (ex IC) EBITDA Handset margin

% Service EBITDA margin

% EBITDA margin Net profit

+14% YoY 0% QoQ 15.8 18.1 18.1 32.3 36.1

• 0.4%

3.9% 2.0% 1.0% 3.1% 43.3% 44.6% 47.4% 44.2% 45.9% 8.5 9.9 9.8 18 19.7 +2.9% YoY +0.5% QoQ 2Q14 1Q15 2Q15 1H14 1H15

• Grew slightly below full year guidance
• Strong YoY improvement from better

service revenue, positive handset margin and lower expenses

• YoY growth driven by continued

promotion of AIS LAVA

• QoQ decreased from less units sold

and lower price

• Driven by higher service revenue

and large regulatory fee saving

• ffsetting higher network OPEX
• Rose from strong service EBITDA

growth and better handset sales margin YoY

+260 bps YoY

• 190 bps QoQ

+410 bps YoY +280 bps QoQ +16% YoY

• 0.5% QoQ

2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 2Q14 1Q15 2Q15 1H14 1H15 +3.8 YoY (Bt bn) +12% YoY (Bt bn) +210 bps YoY +170 bps YoY +10% YoY (Bt mn)

17

+510 bps YoY +40 bps QoQ +360 bps YoY

• YoY, net profit strongly improved due to

EBITDA growth over compensating rise in D&A, finance costs, and tax

Strong free cash flow to support dividend

1H15 Cash flow (Bt mn)

33,253 3,647 16,048 861 243 17,718 5,087

Operating cash flow Income tax paid CAPEX Finance costs

Cash decreased

Operating Investing Financing Net cash

Cash inflow Cash

• utflow

2Q15 Interest-bearing debt

Avg interest rate

• f 4.5% p.a.

Foreign Local Bt36bn 100%

Bt11.4bn (32%) Bt24.6bn (68%)

• all floated
• fully hedged

all fixed

LT borrowing debenture net swap and forward receivables

20.5bn 16.6bn

• 1.1bn

Repayment

• f LT

borrowings

Dividend paid

18

Service revenue

• ex. IC
• Increase around 3% YoY

(revised, considering weak economic outlook and high competition)

Handset sales

• Maintain growth at 10% but with -5 to -6% margin

(revised because more offers of competitive handset campaigns are expected)

• 70% 3G device penetration (maintained)

EBITDA margin

• Consolidated EBITDA margin remains flat

(revised due to expected negative handset margin)

• Service EBITDA margin increases by 200 bps (new guidance)

CAPEX

• Bt36bn

(revised because some project payments are deferred and some projects are delayed)

Dividend

• 100% dividend payout (maintained)

Guidance for 2015

19

APPENDIX

Depreciation & Amortization

The value of 2G network assets will be depleted in FY15

Asset under BTO (2G assets)

FY14 FY15 Bt0

FY14

2G assets

amortization

3G 2.1GHz networks

depreciation

3G 2.1GHz license

amortization

SG&A

depreciation

FY15 Breakdown of D&A Rising 3G investment will result in higher D&A but partly offset by lower 2G amortization Bt18.6n

Bt0.9bn Bt6bn Bt0.3bn Bt12bn Bt0.9bn >Bt6bn Bt8.7bn >Bt0.3bn Bt8.7bn

+10%

21

Monthly Fee Voice (minutes) Data Throttling Wifi Bt 199 80 500 MB 128 Kbps

• Bt 299

100 750 MB 128 Kbps Bt399 150 750 MB 128 Kbps Bt599 300 1.5 GB 128 Kbps Bt799 400 2 GB 128 Kbps Bt999 500 3 GB 256 Kbps Bt1,299 850 10 GB 256 Kbps

22

Tier pricing – volume base

Fair usage policy: no real unlimited data offers

As of August 2015

Special short-term discount 3X data usage for first 6 months

Mao Mao 3G Double Net Internet Throttling Validity

Bt 9 20 MB Limited usage 1 Day Bt 29 120 MB Limited usage 1 Day Bt 49 320 MB (non-stop) 64 kbps 1 Day Bt 59 140 MB Limited usage 7 Days Bt 79 360 MB Limited usage 7 Days Bt 99 600 MB Limited usage 7 Days Bt 249 2 GB (non-stop) 64 kbps 7 Days Bt 199 300 MB Limited usage 30 Days Bt 239 600 MB Limited usage 30 Days Bt 799 8 GB (non-stop) 64 kbps 30 Days

Social Pack Internet Validity

KakaoTalk, Line, Facebook, BeeTalk, Wechat or WhatsApp Bt 5 1 Day Bt 49 7 Days YouTube Bt 29 1 Day YouTube Bt 99 7 Days

Prepaid on-top packages for mobile data

23

Disclaimers

AIS INVESTOR RELATIONS http://investor.ais.co.th investor@ais.co.th

• TEL. +662 0295117

Some statements made in this material are forward-looking statements with the relevant assumptions, which are subject to various risks and uncertainties. These include statements with respect to our corporate plans, strategies and beliefs and

• ther statements that are not historical facts. These statements can be identified by the use of forward-looking terminology

such as “may”, “will”, “expect”, “anticipate”, “intend”, “estimate”, “continue” “plan” or other similar words. The statements are based on our management’s assumptions and beliefs in light of the information currently available to us. These assumptions involve risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking

• statements. Please note that the company and executives/staff do not control and cannot guarantee the relevance,

timeliness, or accuracy of these statements.