Tris Rating has affirmed the company rating on True Corporation Plc (TRUE) at BBB+ and the rating on True's partially guaranteed debentures at A-.
Tris also assigns a rating of BBB+ on True's proposed issue of up to 12.25 billion baht in senior unsecured debentures. The company will use the proceeds from the debentures to refinance existing debts and for working capital.
The ratings continue to reflect True's competitive strength as an integrated telecom operator with extensive network coverage in mobile service and broadband internet, as wells as its improving performance in mobile services.
The rating is based on an expectation of continued support from major shareholders CP Group and China Mobile International Holdings Ltd (China Mobile). However, it is weighed down by a high level of leverage and immense competitive pressures the company faces in its core businesses.
True's 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 divesting assets to Digital Telecommunications Infrastructure Fund (DIF).
Funds from operations (FFO) were 19.4 billion baht, excluding the effect of the DIF transaction and one-time expenses for asset impairment, and expenses related to the termination of a fixed-line concession.
True's mobile services continue to deliver strong performance. The segment's revenue (excluding interconnection charges) continued to grow at a rate that outpaced industry rivals. In the first nine months of 2018, True Mobile had 30.9% subscriber market share and 28.9% market share by service revenue.
However, True's leverage remains high. At the end of September 2018, the adjusted total debt to capitalisation ratio was 63.7%, and the adjusted ratio of debt to earnings before interest, tax, depreciation, and amortisation (Ebitda) was 5.5 times (annualised, from the trailing 12 months). The adjusted ratio of FFO-to-debt was 10.3 times (annualised, from the trailing 12 months).
The stable outlook is based on Tris's expectation True will sustain its strong market positions and continue to deliver solid operating 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.
However, an upgrade could occur if True's profitability improves significantly. Cash flow protection would rise as a result, reducing the risk from the heavy financial burden.
The ratings could be downgraded if True's operating performance deteriorates.