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31 Jan 2011
Approximately USD690 million of debt securities affected
Singapore, January 31, 2011 -- Moody's Investors Service has affirmed the B2 corporate family ratings
on True Corporation Public Company Limited and its 98.9%-owned
subsidiary, True Move Company Limited. It has also affirmed
the B2 senior unsecured bond ratings of True Move.
The ratings outlook remains negative.
"Although True Corp's consolidated financial profile has improved
moderately since 2008, a number of factors -- True Move's
weak liquidity, the ongoing need for covenant waivers, as
well as further equity injection requirements -- underpin the negative
outlook for both companies," says Simon Wong, a Moody's Vice
True Move's credit profile is highly correlated with True Corp's,
given their strong financial and operating links, and their ratings
are therefore equalized.
"True Corp's acquisition of Hutchison's mobile business
in Thailand provides True Group with an alternative mobile business platform
when True Move's 2G mobile concession expires in 2013,"
adds Wong, who is also Moody's lead analyst for the True Group.
However, Moody's is concerned about execution risks in relation
to the HSPA 3G upgrade and the migration of subscribers from the CDMA
network to the new HSPA platform. Furthermore, Thailand's
regulatory environment remains uncertain and there is no indication whether
True Move could migrate its subscribers to the new network before its
concession expires in 2013.
On January 27 2011, CAT entered into several contracts with the
subsidiaries of True Corp. The key contracts were: (1) appointing
Real Future to install 3G HSPA equipment on CATs CDMA nationwide networks,
and (2) appointing Real Move as a "reseller" of mobile services
on CAT's network for 15 years until 2026.
True Move's medium-term refinancing risk is heightened by
USD465 million and USD225 million in bonds maturing in December 2013 and
August 2014 respectively. Such risk has moderated as Real Move,
which has a longer term of licence, is now a subsidiary guarantor
under the existing Bond Indentures.
True Corp will need to spend an additional THB5 to 6 billion in capex
to install 3G HSPA equipment, which will likely dampen its free
cash flow. Moreover, the acquisition cost, which includes
debt refinancing of up to THB6.3 billion, will likely hinder
True Corp's ability to de-leverage in 2011.
At the same time, the B2 rating is supported by True Corp's triple
play business model in broadband, pay-TV and mobile,
as well as its moderate leverage at its current rating level.
The negative outlook reflects True Move's poor liquidity and ongoing need
to seek covenant waivers from its bankers, as well as the regulatory
Moody's is also concerned that True Corp may need to inject additional
funds into True Move under the Sponsor Support Agreement, which
will reduce available funds for investment in the broadband business or
for debt payments.
Given the negative outlook, the ratings are unlikely to be upgraded
in the near term.
However, the outlook could revert to stable should (1) True Corp's
shareholders inject sufficient funds into True Move to recapitalize it
and ease ongoing liquidity pressures or if True Move resolves with its
bank creditors to remove the overhang on the rating; (2) the HSPA
rollout be successfully completed; and (3) the supplemental indenture
be executed by Real Move's acquired subsidiaries.
Moody's also seeks some degree of clarity with regard to prospective
financing arrangements for 3G auctions and the subsequent rollout.
True Move's ratings could experience downward pressure if (1) the company
fails to negotiate anticipated covenant waivers (2) the turnaround in
the fundamental performance of the business proves unsustainable (3) negative
regulatory developments affect True Move's mobile concession or
its ability to refinance maturing obligations.
Moody's last rating actions with respect to True Corp and True Move were
taken on November 21, 2008 when the ratings of both were downgraded
from B1 to B2, with a negative outlook.
The principal methodology used in this rating was Moody's Global Telecommunications
Industry, published in December 2010.
Headquartered in Bangkok, True Corp is an integrated provider of
fixed-line, broadband, internet, and mobile services,
and pay TV. True Corp is listed on the Thai Stock Exchange;
the Charoen Pokphand Group (CP Group) is the major shareholder (64.72%).
Its wireless business is conducted predominantly through its 98.9%-owned
subsidiary, True Move, Thailand's third largest mobile telecommunications
operator. Its pay TV business is conducted through 91.8%-owned
True Visions Public Company Limited, which is currently the only
nationwide provider of pay television services in the country.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
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MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
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Moody's Investors Service Singapore Pte. Ltd.
Moody's affirms B2, negative outlook on True Corp and True Move
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