True Mobile seeks debt refinancing as it struggles to keep pace with market leaders

30 Jul 2004

Thailand’s third largest mobile operator True Mobile, formerly TA Orange, says it plans to refinance approximately THB6 billion (USD145.1 million) of debt in the third quarter of 2004, part of a total of THB33 billion the company owes, by converting its overdue short-term liabilities to longer-term debt. According to the cellco’s chief executive officer Supachai Chearavanont, the company owes THB8 billion of the total to the Krung Thai Bank and the remainder to a further nine leading banking institutions. Although Mr Chearavanont is confident of his company’s ability to complete the new payment arrangements over the next four years, analysts have voiced concerns that the plan imposes a tough schedule on the operator and may undermine its short-term cash flow as it looks to plough THB6 billion of fresh capital into completing the rollout of its nationwide cellular network. However, the CEO remains bullish that recent successes in signing up subscribers – True Mobile added 428,159 new users in the second quarter of 2004 thanks in part to the popularity of its “All together Bonus” campaign that allows subscribers to obtain credits for other True Corp services – will help drive the company forward to its target of 2.7 million users by the end of the year. Nevertheless True Mobile faces an uphill battle as its larger rivals, Advanced Info Services (AIS) and Digital Total Access Communications (DTAC), continue to dominate the sector, controlling around 87% of all users between them by the end of June. Moreover, in the second quarter AIS added 570,500 subscribers and DTAC managed to sign up a further 415,758 accounts, meaning that if anything the big two are still pulling away from the country’s three smaller operators.

Despite True Mobile’s optimism and the short term successes of its marketing campaign, the operator is undoubtedly experiencing a period of turmoil. It fell 300k short of its target for a million new users in 2003, and was widely criticised for its failure to complete a key phase of its network rollout programme; at the end of the year its footprint covered 77% of the Kingdom, a figure it hopes to raise to 92% by end-2005. Furthermore, in early 2004 a key strategic investor, Orange, exited the company after admitting it had lost faith in its Thai operation following the unit’s continued failure to secure either top or second spot in the country’s cellular market. In March it announced plans to sell the majority of its stake in True Mobile to Bangkok’s major wireline operator TelecomAsia Corp. Orange all but wrote off the USD550 million it paid for its 49% holding in TA Orange in 2001, agreeing to sell 39% of the company to TelecomAsia for a nominal THB1. Orange did, however, retain a 10% stake and is allowing the operator to continue using its brand name for three years. The French group’s decision followed True Mobile’s posting of an eight-fold increase in losses for 2003, whilst its then 8.26% market share was deemed way below Orange’s self-set benchmark that all its subsidiaries should control at least 20% of their market.

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