Tris Rating has affirmed the company rating on True Corporation Plc at BBB+ and the rating on True's partially guaranteed debentures at A-.
Tris assigned a BBB+ rating to True's proposed issue of up to 12.246 billion baht in senior unsecured debentures. The company will use proceeds from the debentures to refinance existing debts and for working capital.
The ratings reflect True's competitive strength as a telecom operator with extensive mobile network coverage and broadband internet, as well as its improving mobile services.
The rating is based on an expectation of continued support from major shareholders Charoen Pokphand (CP) Group and China Mobile International Holdings Ltd. But it is weighed down by a high degree of leverage and immense competitive pressures to True's core businesses.
Operating performance for the first nine months of 2018 was in line with Tris's expectations. True reported 104 billion baht in revenue, a 2.6% year-on-year rise, excluding revenue from divestment of assets to the Digital Telecommunications Infrastructure Fund (DIF).
Funds from operations (FFO) totalled 19.4 billion baht, excluding the effect of the DIF transaction, one-time expenses for asset impairment and expenses related to the termination of a fixed-line concession.
True's mobile services continue their strong performance. Mobile revenue (excluding interconnection charges) grew at a rate outpacing industry rivals. In the first nine months of 2018, True Mobile had 30.9% of the subscriber market and a 28.9% market share by service revenue.
But the company's leverage remains high. At the end of September 2018, the adjusted ratio of total debt to capitalisation was 63.7%, the adjusted ratio of debt to earnings before interest, tax, depreciation and amortisation (ebitda) was 5.5, and the adjusted ratio of FFO to debt was 10.3.
The stable outlook is based on Tris's expectation that True will sustain a strong market position and continue delivering solid results in mobile services and broadband internet.
A rating improvement is unlikely in the next 12-18 months, taking into account True's debt-heavy capital structure. An upgrade could be possible if profitability improves significantly.
