Good morning, everyone. Welcome to the second quarter or half year of 2024 result conference call. First, let me introduce our management. We have Khun Somchai, our CEO.
Good morning, everyone.
Our Deputy CEO,
Morning, everyone.
Chief Consumer Business, Khun Pratthana.
[Foreign language]
CEO Broadband, Khun Tee.
Morning, krub.
We have also our Acting Chief Enterprise, Khun Phupha.
[Foreign language]
Our CFO, Khun Montri. And we have also-
Good morning, krab.
We also have our Head Investor Relations and Compliance, Kun Atiya.
Morning, ka.
Ka, myself, Somruetai, will be briefing you this result and running this session. The session will begin with a short brief and then go directly into Q&A. At this time, you may also reserve to ask the question through the chat box. Please type your name and corporate name, ka. Let me begin with our presentation. So for the second quarter of 2024, we observe cautious recovery in overall Thai economy. This is evidence from increased activity in the private sector and an increase in tourism and festivities. Nonetheless, the economic headwinds remain prominent, characterized by high household debt and fragile consumer purchasing power in the low income segment. AIS reported 19% year-on-year growth in both core service revenue and EBITDA, driven by growth across all businesses and Triple T Broadband consolidation.
Our continuous execution in efficiency improvements, alongside quality focus to deliver profitable revenue, led to a growth in profitability of 19% year-on-year to constantly deliver returns to shareholder. The mobile business maintained the growth, increasing 4.3% year-on-year and 1.4% Q-on-Q, due to the rising consumer demand for data consumption, and also from our efforts to offer volume-based tier pricing that matches customer demand. The ARPU sustained Q-on-Q, driven by a focus on high quality acquisitions and benefiting from increasing tourist arrivals, which boosted prepaid revenue. However, postpaid ARPU remains under pressure from IoT SIMs. The device margin increased to 6% this quarter due to subsidy optimization and a higher mix of high-margin handsets. The 5G subscriber reached 10.6 million, or 23% of total subscribers. We also have 5G coverage exceeding 95% of Thailand in this quarter.
Broadband continued growing with quality acquisitions. We added almost 67,000 subscribers, bringing the broadband subscriber base close to 4.9 million. Our ARPU improved to THB 501 due to upselling value packages and cross-selling innovative services. The integration is progressing as planned, focusing on maintaining seamless service quality for customer experiences while keeping efficiency and productivity in mind. Enterprise non-mobile service grew by 25% year-on-year, benefiting from 3BB broadband consolidation and increased demand for EDS and cloud service. AIS Enterprise segment focus on core products like connectivity, 5G digital infrastructure, and platforms in targeted industries. For first half performance, the board approved the interim dividend of THB 4.87 per share, or 85% payout ratio. This will be paid on the third of September this year.
For the guidance, despite first half performance exceeding the guidance, AIS take a cautious view of the upcoming seasonality in the third quarter and uncertainty in the economic outlook, and has decided to keep our guidance unchanged. The uncertainty factors include the revised lower growth estimates for Thai GDP, the rising household debt leading to sluggish consumer sentiment, especially in the low income segment, the cautious views for SMEs, and other geopolitical factors affecting the Thai economy. Nonetheless, all efforts will be made to continue the momentum from the first half of the year in both service revenue, executing cost optimization, and also accelerating Triple Three broadband synergies. Let me advertise for our next event. Please be reminded that we will have analyst meeting tomorrow, eighth August, 1:30 P.M. Bangkok time, in-person session, participant in Thailand at Pearl Bangkok, and Zoom call for overseas participants.
The Zoom link will be sent today. This is the end of the short brief. We'll start the Q&A session now. Please be reminded, please type your name and corporate name, ka. First, we have Khun Pisut from Kasikorn.
Hi, can you hear me?
[Foreign language]
Yes. Thanks for the opportunities. Congrats on your robust results this quarter. This is Pisut from Kasikorn Securities. May I have three questions? My first question is about your operating guidance. In the first half, your EBITDA as the percentage of core revenue was 69.5%, whereas your guidance imply that this ratio will come down to 66.6% for the second half, based on my calculations. Seems to me that your guidance indicates a slower core revenue growth and higher cash costs at the same time. It would be great if you can provide some color about such weaker numbers, what you have seen so far in the month of July and the first week of August, that you can share?
My second question is about the data consumption, which was at 30.5 GB per subscriber per month in the second quarter, or roughly about 1 GB per day. From my understanding, the pull factors could be the removal of heavy usage from unlimited fixed speed. At the same time, the push factor should be the organic growth of data consumption by consumers. As you have migrated a large part of prepaid subscriber using unlimited fixed speed packages over the past three to four quarters, my question is: do you think the current data consumption of 1 GB per day per subscriber would be, would be hitting already hit the limit of data usage at this moment, at least until there would be a new bandwidth-hungry use cases other than video?
How much data consumption could organically grow in the next one to three years? My last question is about your spectrum bandwidth sufficiency. The latest update from the NBTC in the press, local press, is that there will be at least three spectrum bands available for grab early next year, which are 850 MHz, 2100 MHz, and 2300 MHz. My questions are: what scenario would be better for you, either the auction of 2100 MHz from NT only, or the one from NT and the advanced auctions from the ones you and True are currently using?
Number two, for the sake of spectrum bandwidth holding, spectrum holding parity between you and True, is it possible that a fraction of 2300 MHz spectrum would justify your financial returns with the strategic decision that you may make? Thank you, Kap.
Let me answer you in the third question first. On the spectrum, I always communicate to the investor community that when we have the opportunity to acquire the spectrum, we will look for all that opportunity. It depend on the term and condition that NBTC will announce at that time, because we really need all the spectrum to run our business, because our spectrum is more important resources. And also we have to compare at that time on the pricing and also on the competitor movement also. When your question, I think AIS very interest more in the 2.1 and 2.3. It still depend on the NBTC regulation at that time.
If they come up in the Advanced auction, should be better to roll out and do our spectrum plan in the country, not spot by spot like last time. That mean AIS and True also commit them to be the auction in Advance in the total spectrum that they have, but still depend on their decision.
Allow me to take on the first questions on the guidance. Khun Pisut, thanks for your questions. I think on the EBITDA growth, we deliver first half 21% growth. We still keep guidance remain at, you know, 14%-16% growth. But we believe that we will deliver above or on the upper bound of the guidance. The gap, that means, you know, we need to do something more on the second half because of the cautious view on the economy and also geopolitical situations. So I think we also need to spend more on the second half. If you look at the first half, we also indicate that we spend less on the marketing activities. I think we...
That's where, you know, we also need to keep spend more to maintain the momentum of the market as well. So that's the answer.
Allow me to take the second question regarding data consumptions. When Khun Pisut mentioned about 36.5 GB per month, that's in average, causing by multiple factors. Very heavy users normally use could be more than 100 GB, it's possible. A typical users, like us, maybe use about 20 GB to 25 GB per month. Light user may use much less. So it's a lot to do with the groups and applications apply. The unlimited data in the past causing huge artificial high average.
... So that has been tapered down. It helps to maintain a reasonable amount of average down into reasonable level. And also, people who use that for broadband replacement is also not available. So that the changes for the past year, year and a half. Moving forward for the future, when country grow more fiber broadband to home, the average will come down because the one who use mobile to replace broadband will rather go for fiber broadband to home. But they will be growing as well for a typical users, because the better phones they have, the higher data users they do. So what we believe is they will be growing a small amount in average into it, in into the futures, Kap.
That's very clear, Kap. Thank you very much.
Next, we have Khun Virapat from CGSI, Kap.
Hi. Thank you for your presentation. Sorry, I cannot use camera at my office. I have two set of question. The first one, you mentioned about rising SG&A during second quarter. How much did the company book provision for obsolete equipment in second quarter? Is it one-off item or recurring? And is it related to Triple Three broadband? And my second question, as AS mentioned, that first half budget was underspent, what will be key drivers to second half expense? Will they be mainly marketing expense or network OpEx? Thank you.
Allow me to take on this question. The second quarter, when we look at the performance, we achieved the KPI of the organization. So we put the bonus accruals, you know, into the second quarters, basically, including the first quarter's portion as well. So majority of the incremental SG&A is on the staff costs. Impairment is only small and is BAU, not the one-off items and not nothing related to Triple T Broadband. That's what I can answer. On the second half, we also, you know, need to put a lot of focus on the staff performance and also the bonus accrual still need to, you know, continue to put more once, yeah, we achieved the third and fourth quarter result.
So I think that's majority of the items. When I mentioned which on, you know, what we need to spend more on the second half, majority is on the marketing side to deliver the result accordingly. So I think that's the answer.
Thank you, Kap.
Krap, Khun Wasu, Maybank, krap.
Good morning, and thank you, the management, for the presentation. I have two questions. The first one is about your net adds for the mobile and fixed broadband businesses. And the question is: How did you significantly outperform your competitor in terms of the prepaid net adds and fixed broadband net adds? So that's the first question. The second question is about the company's leverage ratio. So Advanced's net debt to EBITDA is around 2.5 times at the end of the first quarter. What is the management's goal for the net to, net debt to EBITDA going forward? Are you already comfortable with the current level, or do you want the ratio to continue declining?
Allow me to answer the first part of the first question regarding the net add of mobile. On prepaid, it's quite natural that we acquire customer, as we used to a very much focus on qualities. But when you compare the industry, is how, each individual operator recognize or counting active customer. They could be using a different, definitions. And along with NBTC rules, or who hold the number of mobile and for how many days that they need to re-PI, I think they probably, have different impact to each operator, Kap.
Yeah, on the net add for broadband, I think we still try to maintain the momentum of the market. I think broadband is still a growing market. So with the enlarged network footprint that we combine with 3BB, then I think we still focus on, you know, selling to new subscribers. But also put a focus on quality subscribers. That's why we can manage now the churn, and in the end, I think we get the net add. I think in the past, sometimes operator put too much focus on acquiring new subscribers. And, you know, that can cause churn to go up. Secondly, I think we also try to focus more on the deliver good service.
I think the people, when they think about selecting the operator, then hopefully they, they pick us more than our competitor.
On the net debt to EBITDA, we monitor at 2.5, as you mentioned. If you ask me whether I'm happy with the net debt to EBITDA now, I think we're quite happy.
It's organically coming down from 2.9 end of last year, basically from the EBITDA growth. So, I think we still monitor the net debt to EBITDA at 2.5. If there's no any beyond 2.5, I don't need to take any action on that.
Just one follow-up question on the leverage ratio. Do you have any comment on the Fitch Ratings rating warning negative on Advance?
There's nothing concerning at this moment. It will be clearer once the VTO took place. So I think that's nothing for us to worry about at this stage.
Thank you, [Foreign language]
Kha. Thank you, kha. We have Khun Thitithep from KKPS, kha.
Hi, can you hear me?
Yes, [Foreign language]
Okay. I have three questions. The first one, management said in the past that you have sufficient spectrum for the usage for now, but if you compare your spectrum for quarter two, True have a larger amount of spectrum. Do you think it is important that you match True, or you pay more attention to the usage? That's the first question. Second question is that your shareholder, your top shareholder would soon change from Intouch to the new co. And then Gulf made it clear in the analyst meeting that the new co would not be a dividend play, but rather a growth company. Do you think that under the new co sharing structure, you would change your investment policy, especially for the non-mobile, like DC Cloud? Should we expect you to become more aggressive in those fields?
And then, the third question, in your MD&A, you did state that the real enterprise revenue, the non-mobile enterprise revenue, if you take out the 3BB consolidation is flat because the corporate, you know, are holding off investment because of the weak macro. Should that be of concern? Because I thought it's supposed to be a fast-growing area, or it just, you know, it's just a noise for one quarter. May I have your view on that? Thank you.
Well, for your first question, Thitithep, krub, I answer the same on the spectrum acquiring, huh? I think today, AIS and True merger to DTAC, the spectrum is comparable, even they are maybe over and have more than us in some area, but not significant in this matter. That's why when we talk about 700, we are all know that we have 15, they have 20, when they merge together. So that's why we have the entity cooperation in this matter. So today, I think the frequency should be comparable, nah? When the NBTC go to the auction, we will think in term of the pricing and environment also, nah.
It's not like last time that we are very lack of frequency to run the business in the period of 1800 something. Now, I think it's comparable. If the price it should be good, we can acquire more. If the price is very, very over, we should not seriously to have more spectrum than them. On the new co, I think after the Gulf merger, I think the policy is still not run to clearly to AIS itself. Today, I run AIS very independent from the Gulf and Singtel. We have our own business plan. However, on the thing that we do, like the TSA, like the cloud, these are all the our direction in our pipeline.
No new order for the shareholder, both Singtel and Gulf. I think this is the trend for the telco or mobile operator in the long run, because our service today is like community. When we expand to enterprise, to cloud, to the data center, this is the new trend of the ICT business. That are the normal thing that telco should do in the near future, krab.
Ka. Your question around non-mobile enterprise revenue. Actually, this quarter is growing quarter-on-quarter in the mid-single digit. And this is a comparable basis, even if we include, because last quarter is a full consolidation of 3BB already. Majority of the growth are coming from the EDS. That's the main part. Cloud is following that. Yep. More of other type of solution services, those type are more affected with the overall economy. Thank you.
Okay, krab. Thank you very much, krab. I don't have any more question. Thank you.
Next, Ranjan from JPM, please.
Hi, good morning, and thank you for the call. A couple of questions from my side. Firstly, if I come back to guidance, the current, top line, or the top end of the guidance implies that revenues will remain flat, on the second half versus first half, while your OpEx is going to increase by 7%.
... If you have higher, I mean, OpEx and to pursue, like, non-incremental revenues, why would that be? I mean, why don't you just cut down the expenses to pursue higher earnings? And the corollary out of that question is, like, why aren't we able to see a higher revenue growth in Thailand? Are we really saying that, like, if we increase ARPU by 1%-2%, which is, like, THB 2- THB 4 a month, the Thai consumers will not be able to pay for that? And the last question is on AIS Cloud. I think you've had a new arrangement with Oracle, if you can share more details around that. Thank you.
Okay, allow me to take on the first questions on the guidance. As I mentioned on the EBITDA guidance, I think similar, we will deliver up about or above, up about, but there's no point to revise a little bit of the guidance upwards. So we keep it remains what... But we can see from the momentum that core service revenue growth will be beyond the guidance or up, up, just touch a little bit on the upper bound. So I think that's, that's the reason why keep guidance remain, similar to the EBITDA guidance.
For the second questions about the partnership with the Oracle, we see the requirement and needs of the market to use the cloud more. We decide to bring the hyperscaler world-class services from Oracle to Thailand and managed by AIS. So we want to take that opportunity to expand our cloud services more in Thailand. Cap.
Okay, so Oracle, you're just reselling their business, is it?
Can you say that again, please?
For the Oracle partnership, are you basically reselling their cloud service, or you're adding something on top?
Maybe I take this question. It's a special Oracle program called Alloy.
Mm-hmm.
Where we white label their cloud. So they provide the cloud, we provide the facilities, they provide training. I think the important point to note there is, it's a world-class cloud facility. Data will be resident in Thailand, and it is operated by Thai company, for Thailand. Yeah.
So if I get this straight, so who owns the infrastructure? Like, are you buying the IT equipment from them?
It's a commercial. Well, the owning of the infrastructure actually is AIS. Yeah.
Okay, got it.
So you can see it as a white label of Oracle Cloud. Yeah.
Got it. And so if I just come back to my question on the Thai consumer, I mean, I would have assumed that it is possible in this kind of market environment to raise ARPUs by 2% or so, but the company doesn't seem to be indicating that's possible. So I'm just trying to understand, like, is it that difficult to increase ARPU by 2%, which is effectively, like, a higher monthly spending of THB 4 per consumer?
I would like to address this one. First half, economies are probably languish at about 1.9% GDP growth. The sentiment seems to get a bit better, but not at best. The second half, we have a very high hope that we will have stimulations from the government as well as the tourism, but the future remain unclear. We will try our best to bring the best service to consumer with the right price, managing the propositions and compositions of the offering. We will continue on to push up the offering, but that remain to be seen. So I don't think we can say so clear that we can up the price by THB 2- THB 4 . Cap.
Yeah, maybe just to jump in a bit here. I think we, especially on the broadband side, we have been pushing up the ARPU quite a bit. I don't think we can do that forever. I think there's need to be a little break for the market to accept and also get used to. I think that's the same thing that's gonna happen on mobile side as well. I think we had a good run on the first half with the, I think, the hope of a better economy. But right now, I think we, we're not too sure how the economy will turn in the second half, and that's why we take a little bit more conservative view, as usual. So I think that's probably where everyone is a little bit, you know, confused why we can't revise up.
But I think in the end, because we look at some risks that may happen in the second half, that's why we take the same stance as now.
Okay. Thank you so much. Appreciate your comments. Just, just one observation. I mean, your ARPUs used to be, like, THB 240, THB 250 earlier, right? So you would have thought that consumers are able to pay that much at least. But I'll stop here. Thank you.
Thank you. We have Khun Arthur from Citi, please.
Hi. Thank you. Just two questions, please. Going back to the question posted earlier, have you actually seen any changes in terms of revenue momentum into the months of July and August on a year-on-year basis? I know that you're concerned about macro, but are we actually seeing it impact momentum so far? Second question I had is with regard to leverage. Any idea in terms of long-term leverage ratios that you'd want to pursue? I know you're at 2.5 times now. Is that the ideal ratio that you'd want, or do you need to reduce this further? Thank you.
Let me answer the second questions first. The 2.5 is the sweet spot that we monitor, and then we still continue to use that 2.5. We do not have any plan to, you know, aggressively, you know, lower our leverage ratios. So that's the answer, Arthur. But in June, July, the momentum still maintain, despite the fact there's also uncertainty in the markets, we still keep our finger crossed.
Yeah, so I think that's why everyone's a bit confused with regard to the guidance. Because if your momentum is actually remaining strong into July, August, and-
Yeah.
Initially the view was low single digit revenue growth in mobile, but you're hitting mid-single. So I'm just, I'm just saying that's, that's probably where, where the confusion lies. Okay, thank you.
We have follow-up questions from Khun Pisut, KSIC.
Yes, thank you for another chance. I may have two follow-up questions. The first one, I think you, you may used to answer this question before, but I just want to understand better about the profit contribution from 3BB and 3BB IF. Looking at your profit growth, it seems to me that the acquisitions added to your net profit almost immediately. If you look at the first quarter and second quarter core profit growth from the previous year. My understanding in the past was that you may have to bear some losses from these acquisitions for a few quarter before the synergy value can be kicked in. It would be helpful if you could tell me what I'm missing.
My last questions is about the tax loss carry forward, that you have quite a bunch of it. Could you please update about the way to utilize this item in the near future? Thank you, Khun.
I think the second one is quite easy for me to answer. We still keep an eye on this, towards, you know, the profitabilities that we can make, on Triple T Broadband company. So we have plans, and we also, you know, discuss with the tax expert around this. There's no urgency on this matters at this juncture, but we keep an eye on this and we'll keep Triple T Broadband profitable to, in order to utilize it, the tax loss carry forward. Khun Pisut.
Okay, I think we'll charge you twice, Pisut, for having a follow-up questions. On the first one, profit contribution from 3BB and IF. In the beginning, I think we, as mentioned, we project that we'll try to manage the impact to be minimal. Understand that 3BB coming from a loss-making last year. When we look at this, we also look at acquisition costs as well, factor in everything. That's why we still feel from late of last year, that this year probably we try to maintain a minimum, you know, loss, if possible, and then we try to convert to a profit contribution sometime next year. In reality, I think we were able to do two things. One, we managed the synergy to come faster than what we planned.
I think it shows in, you know, the result, both the ARPU going up, lower churn on both sides, plus the synergy on operation. That's why I think if you look at the net-net, and plus, we haven't really extend the bridge loan into a long term yet, so the cost of acquisition is still quite low at the moment. So in the end, net-net, yeah, we did have a small gain from the operation. Yeah.
Yes. Thank you very much, Khun.
We have Khun Minl ing from Alpha Absolute.
Hi, can you hear me?
Yes, [Foreign language]
Okay. So I have about four questions. First one is about prepaid subscriber. Can you give us more color on the subscriber that increasing? Is that from the tourists or is that from the Thai? That is the first question. The second one is about the volume of use since the data show that we using the data-
... information, the be increasing. But, but you changed the definition from last time.
We couldn't hear you, Ka. Good morning, Link. Can you repeat the second questions again?
Okay. The second question, the second. Can you give us more explanation on the definition? And from my knowledge, I see that the forecast of the volume per subscriber in the future would be around 75 Gb per person in 2030. Do you think that this is possible to be, and what will drive the data like that? And the third question is about your guidance. I want to know a little bit more that you concerned about the economy or you're concerned about the competition. This may be the third. Three questions right now.
For the first, first question regarding prepaid customer, it comes from both, domestic as well as the tourists, but tourists will be a bit more short-term because it adds in and will get deducted out a month or two later. I would be saying it's about 50/50. But once again, I think the industry has, for the past two quarters, gone through, the strengthening of the regulations of the prepaid identification. So I think the definition, from us remains the same, but for the markets like True and DTAC, they may need to adjust it. So I think that probably it would look a bit different from one operator to the others. That's the first one. You wanna? For the second one, regarding the volume of used, the, the voice kind of broken earlier.
I presume that your question is currently, we have certain amount of average volume of use per sub. Would it be possible, from the forecast that by 2030, the volume of use per sub could go up to 75 GB? I think it's possible. The question is, which network are they going to use? Are they going to use via mobile 5G alone, or it's a mixture of 5G and broadband, in combined? Because the amount of data flow into the device will continue to grow, let's say 5%-10%, depending on contents. The higher resolution content will flow through as a higher bit rate and the amount, even though we all have the same time, 24 hours to use it, and there will be always on application.
But I think the growing part will be quite small, let's say 5%-10%, as mentioned, year-on-year. But we believe that it will be average out from the mobile network through, the fiber network as well. The more we have fibers, the average on mobile will get, probably less. Let me take on the guidance questions. On the, the portion that we take into considerations, majority from the macroeconomy overview. Competition also take part of it, but as, we focus, less on that. You know, in the duopoly market, you know, the competition's always, you know, happens, especially during the, low season and also the peak season in Q4. So we, we don't undermine that, competition as well.
Okay. Can I have a follow-up questions from the answers?
Yes.
Okay. I would like to know more about VOU that you say, but I have a little bit more question about on ARPU per Gb. I have seen that from the prepaid side, the ARPU per gigabit is growing right now, but in postpaid side, it's still be quite the same. Do you think that the trend of postpaid will change to be like the prepaid side? And can I ask-
Okay.
One more question about SG&A also? From your earlier answer that you might increase the marketing expense, but if I take out a D&A from both True and advance, I can see that the first half, the expense is quite the same. So, I just think that if the competitor didn't spend much on the marketing, why do you want to spend more on the marketing?
Okay. Regarding the ARPU per GB, I presume, not Gb, it is more revenue per gigabyte. I kind of presume that way. For prepaid, you've seen the improvement, along as we address it a lot earlier than this quarter. We continue on to repair the price plan in the markets. We cut down the unreasonable, unsustainable one, especially in prepaid, so it help improve the revenue per gigabyte for prepaid. For postpaid, the price plan rather constant so far, even though we optimize it, but it hasn't been much drastic change. So you see quite constant revenue per gigabyte for postpaid. That probably cost of that particular statistic.
Your next question regarding the marketing, Q3 and Q4 are likely to be a seasons for a new device, as well as the year-end seasonality that we plan for. The marketing part will not go direct to fight with customer, but to take care of our own customer, to ensure that we continue on, retain them and improve our both ARPU and retention rates, especially the satisfaction rate. So I think that's a main key that we are aiming for. So we have budgets, the amount of marketing, and we think it's worthwhile to continue on improving the experience, serving the customer.
Thank you very much.
So, we don't have any more questions from the floor. Let me remind you of our event tomorrow. Again, we have analyst meeting at Pearl Bangkok at 1:30 P.M., Bangkok time. So see you guys there. And for the overseas participants, the Zoom link will be sent today. Thank you very much, and see you the next quarter and all the analyst meetings.