This meeting is being recorded.
Good morning.
Our Chief Consumer Business Officer, Khun Pratthana . Our CFO, Khun Tee .
Good morning.
Myself, Head of IR, Nattiya. As usual, I will begin with the short brief, and then we'll go to Q&A. At this time, you may also raise to ask the question through the chat box. Please type your name and your corporate name. Okay. Let me begin with the short brief. The key highlights for this second quarter, basically the second quarter environment was driven by the recovery in the economic activity, particularly in the traveler segment, which resulted in the increase in the international roaming and IDD revenue. This helped support both the year-over-year and quarter-over-quarter growth in our mobile revenue. However, excluding the international roaming and IDD revenue, there was also some domestic recovery in the mobile consumption.
However, toward the mid of second quarter in May and June, the impact from rising inflation on cost of energy and food prices has started to cause consumer to be cautious in their spending. We also continued to see price competition remained in the unlimited data plans offering, particularly in the prepaid segment, which continued to affect the ARPU. On the bright side, two things. First is in terms of 5G adoption. We continue to see rising adoption this quarter. 5G subscriber reached about 3.9 million, increased by almost 1 million from the previous quarter. This is driven by wider variety of devices at a wider price range, as well as the price plan. Despite of that, we continue to see the ARPU uplift close to 15%. Second point is on the postpaid.
We now see the revenue mix of the postpaid of 56% of the mobile revenue. This quarter, we also have the ARPU stabilize Q-on-Q in terms of the postpaid. With the ongoing 5G adoption and the ARPU uplift, we expect the postpaid to continue to be the key support of the mobile revenue improvement. Fixed broadband. As people now are coming back to offices, students back to schools, we have seen some cancellation of the service, but our gross add and net add remains to be strong. We continue to target and to acquire customers in new area, leading with our quality of service and also competitive pricing. In terms of enterprise, the key growth area definitely coming from cloud, through the Microsoft partnership that we have made since mid of last year.
We continue to penetrate well into the large corporate segment, who has strong demand in Microsoft Azure and also Software as a Service. Key financial summary. Overall, some of the mobile recovery year-on-year in this quarter and continue a double-digit growth in broadband and enterprise. We deliver the core service revenue growth of close to 3%. However, in terms of the EBITDA, this is caused by the rising of the marketing and also content that we acquired last year. In terms of the NPAT, this is also impacted partly from the one-time item. If you all recall the second quarter last year, we had around THB 500 million of the one-time item from USO fee and other items.
This quarter, the one-time item is related to the expiring cash card, around THB 240 million. At the end of the first half of the year, we had announced a dividend of THB 3.45 per share, equivalent to around 81% of the NPAT. Lastly, in terms of the guidance, we decided to revise down the revenue and also the EBITDA guidance. This is due to the challenging environment in the second half that we are expecting to continue, especially in terms of the rising inflation, which caused the consumer spending to be a bit weak. However, we expect the 5G adoption to continue. There should be more variety of the 5G devices in a broader price range for the second half of the year.
This will continue to be the supportive in terms of the mobile business and also hopefully in terms of the ARPU as well. Both fixed broadband and enterprise will continue to grow double-digit. Overall, we expect core service revenue to be at a low single-digit. In terms of the EBITDA, we also revised down slightly. Expect EBITDA mainly to be flat or slightly declining. While we focus on the cost optimization, some of the cost item will continue to increase, such as the electricity cost. We also work to ensure that we allocate marketing budget properly to ensure the leadership and also better engage with the customers. Lastly, in terms of the CapEx, we revised a bit down, probably land more close to the previous lower bounds or approximately about THB 30 billion.
5G will continue to be the key focus in terms of the network investment. We'll be focusing more on the quality management, traffic management, while broadband and also enterprise will continue to have the fair investment to ensure that we capture the demand. That's all for the brief. We will now go to the session of the Q&A. Again, you may type your name and your corporate name to reserve your seat in the chat box. First question from Hussaini from UBS.
Yeah, hi. Good morning. First on the enterprise side, I see that enterprise revenues are growing at a faster clip, but at the same time, costs linked to that. Just want to understand what are the margins at this point on the enterprise side, and what kind of margin we should target over the medium to long term on the enterprise business. Second question is on the one-offs. Can you take me through the one-offs that. I'm not sure if THB 500 million was a one-off in the second quarter of last year, and what was the one-off bookings in the second quarter of this year? Thank you. Those are my questions.
Okay. Maybe on the one-off item first. The one-off item last year, THB 500 million. Part of it is in SG&A, another part is in other income, altogether around THB 500 million. The bigger part is from the USO fee. This was the last year. This quarter, the one-off item is in the other income below the EBITDA line. It's around THB 240 million, coming from the expiry of cash card. Your first question on the enterprise margin.
Yeah. I think enterprise, going forward, it will be a combination of, kind of three type of services. I think one on the mobile. So mobile, I think we have the very high margin. Secondly, it will be on EDS. I think EDS is still a big chunk, but I think we also have quite a good margin. And lastly, it will be on kind of resale. A lot of the new growth that comes in ICT, it's more of a resale plus the data center, which I think the margin is lower. So it depends. I think it really a mix of the growth of the, I think, three type of products. I really can't give you a definite kind of margin projection, but it'll be a mix of those three that's gonna drive the overall margin for the enterprise group.
Understood. Maybe just one follow-up on the data center side. Any update on the data center build-up in JV with Singtel and Gulf Energy?
Yes. I think we are planning to announce something once we confirm the final details. I think that there's some progress on that with the two shareholders. I think maybe within the next month or so, I think we'll be able to give you more detail on that.
Understood. Thank you very much.
Next question.
Oh, can you hear me?
Yes, go ahead.
Okay. Thanks for the opportunity. This is from Kasikorn Securities. May I have four questions? My first question is regarding the competitive intensity in both mobile and fixed broadband. I just want to know about the competition that has been different from last quarter to this quarter. Is it any different? Is it better, stable or worse? How about the consumer demand you have seen during the rising cost of living? My second question is about the Disney+. I heard that you have raised the price plan. Could you please update about it, especially in terms of subscriber reaction and revenue upside from this strategy? My third question is about your network CapEx.
Could you please clarify the areas you can save, either fixed broadband or mobile broadband or both, and what are the reasons behind that? My last question is about your proposal to acquire 19% stake of JASIF. What will be happening with the whole deal if JASIF unitholder disagree to terminate the revenue assurance contract for you? Will you continue to buy both, JAS, TTT Broadband, and also JASIF? Without that, and what gonna impact to your earnings, if there is no termination of the revenue assurance? Because the Khun Tee used to mention that this is a earnings accretive deal. Without that, will deal continue to happen or and also if the deal continues to happen, it's still earnings accretive, at least in the next 1-2 years. Thank you. Khap.
Thank you. Khap. This is Pratthana. Let me address the first one regarding the competitive intensity or competition intensity on mobile. From June to July and now early August, we start to see slightly less in terms of price competition in prepaid. When I say slightly less, it's actually maybe about 5%-10% less than before in the sorts of numbering terms. In consumer market softens in terms of purchasing power due to the rise of living costs and gasoline and the others, we start to see slightly less people purchasing handsets. But that's not directly related to airtime, but more or less the handset gets softened a little bit. We hope that toward the end of the year things will improve in terms of consumer demand.
The iPhone and the new phone will get to launch late this Q toward the end of the year. That will stimulate a bit of the demands. Then maybe a bit on the FBB when it comes to the price competition. I would say stable comparing to last quarter. This is one month and a half to quarter three. Not getting worse but more or less stable. Your second question regarding Disney+. Our strategy is ending the promotions, put it that way. The original promotion of Disney+ was THB 35 when customer early or early bird register during the first month and later on THB 49. Now we brought the promotion time to the end going back to the original price of THB 99.
Millions of customer have subscribed to that, and they continue to have the special price when they subscribe to it. If they finish the subscription, they unsubscribe and they want to resubscribe again, they may not have the same promotion price. That definitely give the value for customer who engage with us early. For new customer, there are choices for sure. Either subscribe to the THB 99 or with the mobile bundling plan of postpaid, they get benefits of Disney+. This for us is clearly to show the benefits of Disney to the existing customer of Disney subscriptions, as well as the postpaid customer and prepaid bundling plan.
I think on CapEx saving, basically, I think we look at a few things. One, on the rollout of the mobile network. I think there are areas where we feel we can save on investment for this year. That's why we do a lot of traffic growth that comes actually driven by more of the people on the unlimited package, which there are ways that we can work with the apps to provide kind of better network or traffic management. Secondly, because we have this deal with 3BB. On FBB front, we also try to optimize the investment as well, so that we don't need to duplicate investment or, you know, invest in the same area.
With those, I think two factors and we are able to kinda minimize the investment for the second half of the year. As to your question about the JASIF arrangement, I think it will be difficult for us to move forward if we don't get the restructure, mainly because with the pricing that's agreed at the moment, it made the business not competitive in the market. If you use the total rental rate divided by expected subscribers, and you add the cash cost to operate the business, you see that basically it's way beyond the current ARPU in the market. I think that's one of the reason why we really, you know, gonna be explaining to JASIF unit holders that the agreement they had doesn't make business sense, in the current situation.
I think we'll be talking more about this after, I think next week. Next week when we have the analyst meeting. Let's see how JAS perform in the second quarter, then we have a lot more things to discuss about. On the impact to the P&L, if there's no restructure, then in the first two years, probably it could be dilutive. After that, with the synergies then, you know, it's, y eah, come back. Anyhow, as mentioned, it will be difficult to go ahead without the restructuring.
It's very clear. Thank you very much.
Okay. Thank you. Next question from Khun Wasu, Maybank.
Hi. Good morning, and thank you for the presentation. I have three questions for the management. The first one is about the mobile revenue. If we strip out revenue from tourists and migrants, did the revenue from domestic consumers actually drop Q-on-Q? The second question is about the 5G ARPU uplift. Khun Nattiya mentioned that ARPU uplift of 5G migration is still close to 15%. My question is, how did you keep the ARPU uplift at such a high level when the prices of 5G data plans have been declining, especially the price plan of the 5G entry level? The last question is about the NT deal. Is there any update on the upcoming deal with National Telecom regarding the network sharing and also the 700 MHz spectrum purchase?
Let me just take the first two question, and maybe management can add a bit more. On the mobile revenue, if we exclude international roaming, IDD, or the traveler segment incoming, the domestic mobile revenue Q-on-Q still have a growth. That's why we say we saw some domestic economic recovery in the second quarter. However, year-on-year is still a decline though, but Q-on-Q there is an improvement. Your second question on the 5G ARPU uplift. Basically, even though the 5G price plan had expanded downward, but that's basically expanding to capture wider market segment. So in each of the particular segment, we're still expecting customer to move up their plan from their existing 4G plans to the appropriate level of their targeted 5G plans, which continue to provide the ARPU uplift.
For the NT deals, because this is a big deal of the state enterprise, now the NT already passed all the proposal to the Secretary of DES, and Secretary of DES already sent to NESDC, that National Economic and Social Development Council, that have to consider because this is a big project. I think everything according to the time frame that NT plan to make it happen.
Thank you.
From KKPS.
Hi, can you hear me?
Yes.
Hello.
Please go ahead.
Okay. I have three questions. The first question is for Khun Somchai, if I may. If we assume that the NBTC approved the proposed merger between Advanced and DTAC, do you think it's going to be net positive or net negative for Advanced? For the positive side, when the number of player decline, you know, the price competition should subside. But at the same time, the merged firm would gain scale. So for the first time, you would have a formidable competitor. Okay. So in your view, it's going to be net positive or net negative? That's the first question. Second question is on the prepaid revenue.
Your prepaid revenue start declining year-on-year since the last quarter of 2019, and then up until the second quarter of this year, it is still declining by 8% year-on-year. Do you think that's because of the macro factor or because of the migration from prepaid to postpaid? Should we expect the prepaid revenue to stop declining or, you know, start growing anytime soon? That's the second question. The third question is on Disney+. Okay. I noticed that the cost of content pushed up the cost of service. Now, on the revenue side, does the revenue generate from Disney+ cover the cost, or do you think that the service is mainly, you know, help you reduce churn rather than make profit in itself? Those are the three questions. Thank you.
Let me answer you, the first question. On the merger of True and DTAC in theory, should be the positive in the industry, because when we have less competition, should grow all the revenue more together. However, it still depend on one thing, on the position of True, DTAC and also AIS that we are willing to fight together to be the number one in the market or not. If both company seem to be the number one, there are some price competition in term of acquiring the customer in their system something. If they are not much to be the number one, I think the industry should be healthy in this matter.
However, I think based on this period, if the merger happen within one or two year period, it will be benefit to AIS to bring the customer. Even we don't compete in the market with the iPad. Customer will move to us for sure based on the messy combine among two operator, especially in the network side. This is very good opportunity for the AIS. After two year, after they merge together, that story may depend on the situation that both company who want to be the number one. The competitor will face in that period. That is my opinion.
Right. May I have follow-up questions on this issue? You know, since the merged firm would have scale, do you think that there's a need for you to adjust the payout ratio? Do you need to reserve more cash just in case that they become aggressive after the first two years?
I don't think so that we will face that problem. Especially our major shareholder, both Singtel and Temasek, they are really clear to be the lighter investment company to do and see AIS as the dividend company for their shareholders also. I think we plan three-year plan in this period with our strategy that try to prove. I don't think we should have the problem in terms of the net profit and payout ratio.
Right. Okay. Thank you very much, Khap.
Khap. On your second question, regarding the prepaid revenue. In the big picture, industry or especially us, we continue to see the prepaid revenue proportions less and less because customer will use more then upgrade to postpaid. That's number one. The second one is more about the spending of prepaid or ARPU. It's been declined simply a lot because of overly competitive. Compete very badly on the unlimited low plan. That's drive down the prepaid ARPUs. Long term, if the competitions are less, the ARPU shall be very stable on the prepaid segment. That's my question on number two. Number three, Disney+, the cost and the revenue are matched, so we are not making loss on that.
Right. That's really clear. Thank you very much, khap. That's all the question I have.
Next question, Arthur from Citigroup.
Hi. Thanks for the opportunity. Several questions, please. Firstly, on the revenue guidance, can you please elaborate on what's driving this? Is this mainly on competition or is this mainly on the weaker consumption trends? I'm not sure if it's possible to split the impact between these two factors, as presumably, the recovery cycle will be different on those two. Second question I had is with regard to priorities with regard to market share and profitability. Where is AIS focusing more? Would you need to retain the number one market share position and therefore would need to compete aggressively until that's retained post-consolidation? Or is the focus more on the profitability side? Last question I had is with regards to the guidance. I understand you tied in at THB 30 billion. Is this more of a deferral into 2023 or are there specific efficiencies that have been identified? Thank you.
Let me address the first one regarding the revenue. I would say both. Number one is over competition will drive down the growth of revenue unnecessarily. That probably contribute the most part of it. The second part regarding the business activities, COVID, traveling, will kind of contribute in the single digit level in terms of revenue growth. I would say both, but a majority, if you look at the macro pictures, the competition drive down the revenue more than the other factors.
Okay. In terms of priorities, it's a very tough question to answer. Basically, we look at both, and we are not willing to trade too much for one or the other. I think we basically still wanna keep a very healthy profit and also, majority of the market share. It's a question that we also discuss with our shareholders as well. I think basically we look at the long-term profitability as a goal. We, you know, in the end, we'll do everything we can to make sure that we can sustain long-term profitability. If you trade too much of the short-term market share just to maintain profit, I don't think that's a good sign either.
If you know, try to gain market share too much at the wrong time and trade off profitability, then it's not money well spent. I think it is hard to answer, but what we try to do is make sure that we have long-term competitiveness in the market to create even more profit in the future. I think lastly on the guidance, CapEx, I think basically as mentioned before, for later part this year, we look at how we can optimize the investment, both on the mobile front with the 5G. 'Cause 5G, there are two, three ways that we can really launch a 5G service.
We want to have that investment in line with the handsets that's coming in, plus also the economic situation, because we need more handsets to be able to really utilize the 5G network. As well as on the FBB, as mentioned, we looking at certain kind of cooperation with 3BB, to make sure that we don't over-invest in the same thing or the same area. With those two then we feel that, you know, we can manage within the THB 30 billion. It's not a deferral. I think basically next year we'll look at the demand again and where we need to upgrade the equipment.
To clarify the comment on the 3BB efficiencies, because the deal has not been closed yet, and you've mentioned a while ago it may be difficult to pursue if there's no revision in terms of the contract. If you assume, in case that the deal doesn't happen, should we see some CapEx coming back into FY 2023, if that's the case? Is that how we should view this?
Yes. I think there are some, I would say, quick cooperation that we both can do to make sure that the operation can run smoothly. If you recall what we mentioned when we discussed about the deal, we don't have a very wide coverage compared to them, right? That's one thing that we find ways to do a quick cooperation. There are other ways as well, but I think that we'll discuss a bit more detail later. There are a few things that we can do this year, and it's a no regret move. Even if you know the deal doesn't go through, you know, we can still benefit from that in the medium run.
Got it. Thank you very much.
Hi. Thank you. I joined a bit late, so apologies if some of these questions have already been asked. So I have three questions. The first one is about the Jasmine acquisition. I was wondering if AIS have submitted the application for the TTT Broadband acquisition permission yet from the NB with the NBTC. Just wanted to check if this has happened yet. The second question is regarding the Jasmine or TTT infrastructure. I understand that the technology level that Jasmine uses employs for their fixed broadband network is let's just say not on par with what AIS and True has.
Will this result in quite a bit of upgrade investment costs after you acquire the TTT Broadband asset? Or, you know, because it's upcountry and the requirement is from the customers is more limited, there really isn't much need to have everything as sophisticated as you would have, say, in the Bangkok metropolitan area. Just asking about the infrastructure upgrade issue for Jasmine network if you were to acquire it. Lastly, this one is for Khun Somchai. As you know, the NBTC is still deciding about what to do with the merger.
Let's say that they allow it, or at least they give their opinion per the 2018 notification. One of the things that they can do is come up with a remedy. In your opinion, what would be a sensible remedy for the merger that would ensure a fair competition once the merger happens? You know, would it be something along the line of separate branding for a couple of years, or do you think something else a bit more stringent measures are required? Thank you.
Let me answer your, the third question. I think NBTC board member they are considered very fierce in this matter. Even the NBTC officer try to propose to them that they have no right to approve or not approve, just have some criteria to control the merger company or something. However, they are on the thinking that they will allow the merge or not merge. If they are they have to approve the merger, I think a lot of condition that they ask for the NBTC office to propose to show the public that should be fair on the things and can control the company of merger.
I think more important thing that they are worried about the spectrum and frequency. Because when they can merge the frequency will hold a lot. They may have some regulation to cannot combine the frequency together. Because AIS, as our position, we also very clear that when we go to the auction on that frequency or position, there are different supply, something. If they have to do so and merge that frequency, it may be not fair for AIS. That another one that they have to consider. They may think based on this period, if they are willing to put the merger to be the number three player in the market, they may ask for the period that can merge.
That they are thinking in that way. The merger company have to find the third player in the market and can take that frequency out with the price something. This is all the things that they are trying to think. I think I still don't know the real answer yet. However, the new board of NBTC, they are very serious and focused to make sure to make it fair. They are willing to have the big third player in the market before get the merger go also. This is my internal information that I got.
Regarding the frequency, I think, so I guess you're looking for something like a moratorium on frequency merging for a few years or you just can't merge the frequency at all? Just wondering what you meant by not merging. Like a temporary measure or more like a permanent ban on merging frequencies until the license expires.
Still unclear. If they have to do in the future, there are two things. First, they have to compensate back to AIS also, because when we auction, that frequency have the value. How much value they have to compensate? I think it's not easy, if in the long term they do. I think, in the long term, they try to ask for the merger company to find the other one to take impact that frequency to be the third player. That's their idea.
Okay. Got it. Thank you.
On the submission, I think we haven't submitted. The stand up process is, I think we'll wait for the shareholders and also the unitholders on the JAS side to be completed, you know, to do the official submission. On the infrastructure, I think basically it is not all bad. I think there are some good, there are some something we need to improve. That is not gonna be a major upgrade that you mentioned about. We also check in the. You can look at the feedback in the market. Their service is also quite okay in the market.
Okay. Got it. Thank you very much.
Any further question? Currently we have no further queue. I'll give maybe a minute or two and see if anybody has further questions. Otherwise, feel free to contact our IR team for any further questions. Next week, on Wednesday, August 17th, we will hold the half year analyst meeting with our CEO, CFO as a key speaker discussing on the broad strategic direction and the focus of the second half of this year. The event will be held physically. There will be no virtual or hybrid event offering. For those who are not coming to Thailand, feel free to submit your questions ahead of the time. We will also include your questions into the session.
The session will be recorded and will be updated on our website, and we send out the emails of the record to all of you later. Okay, if no further questions. Okay, I think one more follow-up question from Wasu Mattanapotchanart, Maybank.
Hi. Just one more question from me. I'm looking at the document that JASIF has submitted to the SET website, and there are four agendas that the JASIF unitholders would have to consider. If we assume that the JASIF unitholders approve three out of four agendas, except the agenda regarding the non-compete clause that would allow the cancellation of non-compete clause would allow AIS to build the fiber network in the same area as JASIF. If that agenda is not approved, would you still go ahead with the 3BB and JASIF deal? That's my question.
I think when we put up all the conditions we would like to revise, that's really what we need, and we feel it's fair. If we don't get all of those, then it will be difficult to go ahead.
If the unitholders do not approve any of the particular agenda on the documents, what would be the next step for AIS? Would the deal go back to the AIS board?
Yes. I think in the end, once we see the output or the result of the meeting, then we'll need to bring the result back and discuss it with the board. As mentioned, we already kind of carefully considered what we think is necessary for the business to go on. I think we offer a fair deal to both JAS shareholders and JASIF unitholders.
Okay. Thank you.
Any change from that, then difficult for us to move.
Okay. Thank you, Khun Tee.
One more follow-up question from Khun Thirithip.
Yes. Hi. Hi. I have follow-up questions on the potential remedy. Khun Somchai mentioned that the regulator may like the merged firm to reallocate part of the spectrum to the potential third player. Then we don't have the third player in Thailand, and it you know we may not be able to find one in my view because telecom is such a capital-intensive industry. What happen if no one can find a third player? What happen to those spectrum? Do you think it's possible that they would require the merged firm to return the spectrum to the NBTC, like what they do in Malaysia? Basically, the question is that what if we don't have the third player?
It is for sure that they cannot turn back to the NBTC. We will veto and not allow. NBTC don't want to do in that way because this frequency makes a lot of money to the government if they can return, even they're unnecessary to use it. NBTC have no right to return back, for sure. This is the team. AIS also veto if they can return. I think if cannot have the third player in the market, the condition, they may not allow to merge until have the third player, or they allow and approve that I still don't know, go to merge. The frequency location they cannot utilize more effectively by shifting the frequency connect together.
They will see, still there on that position of frequency for sure.
Right. Okay. Khap. Thank you very much.
Okay, ka. Thank you everyone for participating, and hope to see you all next week at the Siam Kempinski Hotel. Also see you next quarter. Thank you.