Hi, good evening, everyone. I hope you can hear me well. Welcome to True Corporation second quarter financial publications for 2023. My name is Naureen. I'm the Head of Investor Relations. With me today, I have our CEO, Khun Manat, our Deputy CEO, Khun Sharad, and our co-CFOs, Khun Nakul and Khun Yupa. Along with the presentation, several other documents are available on our Investor Relations website for you to look at. If you want to ask questions, you can raise your hand. We will queue you up. You can unmute yourself later to ask your questions. You can also type your questions in the chat box. If you are able to reach out to me, you can also do that. We will now start our presentation with Khun Manat.
Okay. what we say, good evening,
Good evening.
Good evening, panelists. Welcome to this Q2 conference setup. Just like to give the highlight since the March. I and Khun Sharad travel around the country to listen and hear the employee and the customer feedback from the Better Together campaign, which we get a very good feedback and very good satisfaction from the customer, which they very delightful on the network quality and also with the both privilege from the True and DTAC that combine together. Definitely the 2.6 and the 700 megahertz that we already combined together with the roaming technique provide the best and very satisfied world-class quality for the customer.
This quarter, we have a pretty good positive momentum on the quarter-on-quarter, which normally from the market rationalization that start from the improvement from the macroeconomic situation and also the market rationalization pricing. Some as in sense, the integration and the synergy realization is on track, and I will explain in the next page. Yeah, please. The integration and the synergy realization that we have done, the first thing was the network integration vendors that has been appointed through our RFP process. We spent 4.5 months. This is our work record of the vendor selection on the amalgamation network. It's pretty good news for us that we really delightful that this process already done.
THB 3 billion saving from the CapEx optimization has been done. The impact from the customer also have seen from the higher customer survival rate, which as in sense, we have the lowest of the churn rate for the DTAC brand customer. Some number that I like to give to see the delightful from the customer as from less like the DTAC brand. 12% usage more from the roaming network to the 5G. Speed increased 2.3 x. Also the customer that roaming each other from True and DTAC, reached 29 million, which we also be very happy on that as well. Customer be able to utilize the best quality of our network there. Okay, let me pass to Khun Sharad.
Thank you, Khun Manat. I just now take it further, what it means for us in terms of subscriber growth and the momentum we are picking up. I think needless to mention that the combined forces of DTAC and True have boosted our market execution capability as well as strength, which is turning into positive contribution momentum from the last quarter. If I look at on the network side, as of quarter two, 2023, True Corporation is privileged to be the largest 5G provider in Thailand by population coverage of 90%. Additionally, 4G population coverage reaching 99%, which boosts indoor coverage and quality, which means that customers are getting better network experience.
True Corporation registered 8.3 million 5G subscribers, which is a growth of 32% from the previous quarter, which is a result of improved network experience for the customers. You heard Khun Manat talking about when we were traveling down in regions, customers were expressing the similar sentiments. 5G ARPU continues to witness an uplift of 10%-15%, mainly driven by device bundling and higher usage from enhanced network experience. Both DTAC and True brand continue to be the leading operator of choice for tourists and migrant segment as a result of personalized and tailored content, encompassing localized entertainment and social media propositions, along with many bundled offers.
Transactions under the privilege loyalty programs increased by 17% quarter-on-quarter, mainly driven by the Better Together campaign, which also resulted in 9% higher retention of high-tier customers quarter-on-quarter. This is getting better and better, and we are quite, you know, proud of this moment, that customers are able to use a better network experience, and that's the reason why they are sticking on. As of Quarter 2, 2023, the active digital user base of True Corporation, which encompasses the combined app as well as web platform, along with digital channels and stores, reaching approximately 14 million, 14 million, which is quite a good number, and that gives us confidence to move on from here on progressively.
If you look at non-core service revenue, that's grew by 20% from last quarter, and that's really encouraging for the team. Get a lot of motivation to even work more effortlessly for the next level mega. If I talk about True Digital Group, that continues to expand the reach of these products in both online and offline channels, allowing the wider population to access the encompassing advancement of smart living products, while continuing to enhance the efficiency and sustainability of business in various industries, including agriculture, real estate, retail and restaurants, as well as logistics and industrial segment. True Digital Group and China Mobile International announced a strategic partnership to establish a global IoT, machine-to-machine platform, through the implementation of True's 5G network.
That enabling seamless connectivity between, you know, the sensors, internet devices, machines, or machine-to-machine communication mega. Thereby, True Digital Group registered at 27% year-on-year growth in digital monthly active users, MAU, reaching 36.4 billion at the end of quarter 2, 2023. I move on to the other part, which is equally important as we do business in the country, is how are we empowering digital adoption and inclusion of societies through digital services offerings? If you look at on the left-hand side, True Digital Health continues to enhance healthcare experiences by seamlessly connecting patients, users with healthcare professionals through MorDee platform, which I am sure most of you are familiar with.
The TeleMed consultant provides a comprehensive range of services which are available 24 by 7, with more than 500 doctors, and access the expertise of over 20 specialists, while enabling direct medical expenses claim with insurance companies. As an online health form, the digital health enables doctors to issue e-prescriptions for time saving and we promise to deliver medicine right to doorstep within 1.5 to 3 hours after the consultation is done. Recently, patients and users can consult with doctors instantly through LINE application, which is MorDee official account, even without downloading MorDee application, which is a unique phenomenon. That allows a wider population to access and adopt Telemedicine.
If you talk about this quarter, True Digital Academy collaborated with Tourism Authority of Thailand, TAT, to come up with tourism management program for executives. Apart from knowledge in tourism management, the program is introducing new digital technologies and digital transformation to uplift the proactive marketing plan strategies as well as tourist promotions. True Digital Academy also announced the MOU with the top Thai universities for co-design promotions. Both elective courses and joint degree empowering individual students with the necessary digital skills to be ready for future employment in the digital world.
What we are talking about is that we as a corporate citizen, we also do take care of many programs and initiatives without empowering society, and that's what we just try to, you know, explain to you guys. Now, I would like to hand over to our Co-Chief Finance Officer, Kun Nakul, to walk you through our financial performance for the second quarter in detail. Thank you. Kun Nakul?
Thank you so much, Khun Sharad and Khun Manat. This is Nakul. I'll walk you through the financial performance. Good evening, good afternoon, good morning, whichever part of the world you are. As far as the financial highlights for Q2 2023 for True Corporation is concerned, as already mentioned, there is a strong momentum that we are carrying from Q1 into Q2. The service revenue has seen a 1.1 percentage point improvement, while the OpEx, excluding depreciation and amortization, has seen a 16.7 percentage point decline quarter-on-quarter. As a consequence, the reported EBITDA is almost 15 percentage point higher quarter-on-quarter.
Looking at the performance that we have on the bottom line, specifically on the EBITDA, we are revising our guidance for the year 2023, to as far as EBITDA is concerned, from flat to low single digit decline, to low to mid single digit growth. It's a couple of notches improvement as far as the guidance for the full year is concerned. If I walk you through the performance in a little bit detail, I'll start with the service revenue and the total revenue development first. We see positive momentum in service revenue Q1Q, which is driven mainly by the mobile and online segments. As far as the total revenue is concerned, it declined about 4.6% quarter-over-quarter, primarily due to the lower product sales from seasonality.
Q2 is, as you know, is less seasonal, as far as handset sales are concerned, as compared to quarter one. The service revenue, on the other hand, has improved 1.1% quarter-over-quarter, which is driven by market rationalization, as Khun Manat mentioned, and also our effort towards selling converged products, with respect to cross-selling and, you know, continued sub-based growth. The interconnection revenue declined quarter-over-quarter due to a one-time benefit that we got in Q1 2023, from a favorable settlement of a litigation. This is something that you guys are already aware of. If I move on to talk about the different segments, first I'll take mobile first. As far as mobile is concerned, the service revenue improved 0.8%, driven mainly by subscriber growth.
Let me first talk about the ARPU, because that's something that we've been focusing on for quite some time. As far as the blended ARPU is concerned, that has remained stable quarter-over-quarter, but it's important for us to see that the efforts of market rationalization and working towards improving the price proposition in the market is starting to bear some early fruits. Prepaid ARPU has improved 0.5% quarter-over-quarter, and the postpaid, on the other hand, has also improved about 0.4 percentage point. We've also added subscribers in this quarter, and the addition in subscribers is about 1.9%, which is mainly driven by tourists and also migrants, while the postpaid subscribers have remained flat. True Corporation continued to be one of the leading providers as far as this segment of tourists and migrants is concerned.
As a consequence of the improvement in ARPU and also, with respect to the improvement in subscribers, the mobile service revenue has improved 0.8% on a quarter-on-quarter basis. If I move on to the online business, this is another good story for us. For the first time after quite a few quarters, we see a significant improvement in the ARPU. You know, if you see on the slide, from 463 levels that we saw in Q1, the ARPU, as at Q2, is about 475.
Our focus on quality subscriber acquisition by removing discounts and utilizing the cross-selling opportunities, has actually resulted in an ARPU and a service revenue improvement for this business, which is about 2.5% on ARPU and 3.2% on a quarter-over-quarter basis, as far as the service revenue is concerned. As you can see from the slide, we are talking about multiple cross-selling initiatives. Basically, what we are trying to do is we are cross-selling the DTH customers to the converged offering that are now available as far as the True brand is concerned, and that is starting to bear some fruit. We see a positive momentum on a month-on-month basis as far as the customers who are taking these attractive offers.
If I move on to the TV business, the pay-TV revenue is impacted by lower quarter-over-quarter subscription revenue. The ARPU that you see in this quarter is kind of relatively stable, but you see a decline as far as the service revenue is concerned, that's basically on account of the slight decline in the subscribers. As far as TrueVisions is concerned, the mitigation plan is definitely to drive inflow revenue through various strategies which are being employed already, such as, you know, EPL and UEFA season passes, upselling existing customers, and accelerating TrueVisions Now through tailored pricing. That's our initiative as we are going forward, as far as this business is concerned. If I move on to the OpEx pictures, allow me to explain this in a little bit more detail.
The total OpEx, excluding depreciation and amortization, has significantly reduced quarter-over-quarter on account of ongoing efficiency measures that both brands or both companies, DTH and True, have been historically doing. At the same time, what we've been able to achieve is, we've been able to achieve some quick-win synergies. That's something that, you know, we could focus on, because combining the strengths of the two companies, we were able to see what are the areas of the cost that we can effectively drive downwards. To explain in a little bit more detail, the SG&A has decreased quarter-over-quarter due to optimization in marketing spends, improved collection, which is also resulting in the lower bad debt. These are the two things that clearly stand out.
As far as network cost is concerned, it has decreased quarter-over-quarter due to the reduction in energy price tariff, as you are all aware of, but that wasn't the only factor that resulted in this decline in the network cost. It was along with the other efficiency initiatives that we were able to do that drove the cost down quarter-over-quarter. Cost of sales declined due to the lower product sales, as I had mentioned earlier, it's due to the seasonality that's there. The interconnection cost was benefited by a reversal of a provision, which was pursuant to the litigation that happened in Q1 2023. Q1 2023 had a positive impact on some line items, and Q2 2023, we've had a reversal of provision because of the same settlement that happened in Q1.
Actually, you can see in the appendix, we have a list of one-off items that have impacted this quarter and the previous quarter for you to make a thorough comparison of the financial performance of the company. In this presentation, I will not walk you through those one-time effects, but you can definitely refer to the appendix. From revenue to OpEx and to EBITDA, we see a sequential growth in EBITDA, which is basically from higher service revenue, combined with the efficiency initiatives that we had. Quarter-over-quarter, as you can see, the EBITDA has been benefited by OpEx reduction from efficiencies, quick win synergies, and also the net positive impact from the settlement of the litigation.
EBITDA in Q2 2022, that's important for you to know as you draw your comparisons versus last year, it was positively impacted by deductible filter cost of THB 1 billion. Just please keep that in mind when you look at the Q2 2022 performance of the company. It's important to also highlight the normalized performance of the company. Even if I normalize for these one-time effects, the EBITDA grew about THB 1.6 billion to THB 21.1 billion in Q2, which is an improvement of 8.2% on a quarter-on-quarter basis. You can see the reported number is THB 22.3 billion, the difference between that and THB 21.1 billion is a normalization that we've done to show a comparable performance. EBITDA, as a percentage to total revenue, remained healthy at about 45.4% for Q2 2023.
If I move on to the net profit, net profit is showing a loss of about THB 2.3 billion as far as second quarter of 2023 is concerned. In this quarter, the net profit is impacted by a reversal of a deferred tax asset on carry forward losses of DTS due to a potential business restructuring that is happening within the group. That's a non-cash effect. It basically is a reversal of a deferred tax asset. The net profit was also impacted by higher Depreciation and Amortization expense. That's basically on account of the higher rollout, and also alignment of useful life between the two companies. In this quarter, there was also some integration costs, which were recorded below the EBITDA of about THB 250 million-THB 300 million.
CapEx in this quarter, as you can see, is significantly low. It's about THB 3.4 billion, this basically coming, as Kun Manat was mentioning, about THB 3 billion coming from the optimization that we've been able to do, thanks to the combined strength of the two brands and the two companies. In summary, if you, if you look at the performance of the company, there is positive momentum, which is driven by the mobile and online segments, as you've seen in the top line development. The ARPU is something that is improving this quarter after a decline that we saw in the previous quarter, which was a concern that all of you had. Market rationalization is leading to a slow recovery, but sure recovery as far as ARPU is concerned, and focus definitely is the quality acquisition.
There is a very strong focus, as far as management is concerned, on the efficiency, and the initiatives contributing to the realization of these quick win synergies are the ones that are very, very high on priority for all of us. Most importantly, the synergy realization is actually the key focus for us in delivering value to our stakeholders, and that's something that we are monitoring on kind of a weekly basis in the management teams. I will end my part of the presentation with giving you an indication of a guidance, which I already mentioned in the beginning of the slide. The service revenue was indicated to be flat, as far as the previous guidance is concerned. We still maintain the service revenue is gonna be flat.
This captures all impacts that may come on account of amalgamation or on account of the remedies. As far as the EBITDA is concerned, from a flat to low single-digit decline, we are now indicating a low to mid-single digit as far as EBITDA is concerned. It's like I said, it's a two-notch improvement as far as the guiding on the EBITDA is concerned. The CapEx frame that we indicated last time, THB 25 billion-THB 30 billion, still remains to be THB 25 billion-THB 30 billion. Please keep in mind, these numbers are for a 10-month period of operations for True Corp. This is all I have. Now I hand it over back to Khun Nor.
Everyone, start taking questions. I see the first one is Khun Pisut. Khun Pisut, you can now unmute yourself, and please do turn on your camera.
Yes, hi.
Hello.
Yes, thank for the call. This is Pisut from Kasikorn Securities. Can you hear me well?
Yes, can see you also.
For the first one, your upward EBITDA growth guidance, have you know, a few small question on this one? Have you included the legal settlement gains into the new EBITDA guidance? Related to that, what have changed so far from the new guidance, which is better than the previous guidance? If my calculation is correct, you are trying to say that the second half EBITDA this year is gonna be higher than first half EBITDA this year? Yeah, that is my first set of the questions.
Okay. Thank you so much, Khun Pisut. These are your three q uestions, right? If I understand correct.
No, no, this is just one question. Sorry.
Okay. So these are three questions of the first question. Okay, understand. Okay, as far as EBITDA is concerned, you know, the legal settlement gain is already included in the EBITDA guiding, because we're talking about the reported numbers as far as 2023 is concerned. Please keep in mind, these are 10-month numbers, right? In the MD&A, we've also indicated the March number, if you would like to see. Because, you know, like we announced the results in the previous quarter, we showed the Q1 performance to you. So we have a March 23 and March 22 number that you can refer as far as MD&A is concerned, and then you can do the modeling for the 10 months. At the same time, you know, let me take the third question first.
The second half, EBITDA will definitely be better than the first half. That's, you know, you're absolutely right as far as estimating that is concerned. Like I mentioned, you can look at the March numbers that we've indicated and do your, you know, extra calculations. What has changed from what we indicated? Like we mentioned in the previous call, it was 1 month of operations for the company. We were quite new as far as management was concerned. You know, there were definitely some early signs of market rationalization. Now, in this quarter, we've definitely seen things improving. The competition scenario as it remains stable, I'm sure you're gonna talk about it, but I'll leave it for, you know, for that part.
At the same time, we have done a good realization of the Quick Win synergies, and that has helped us to get the confidence to give a good set of results for Q2, which will gradually, you know, carry on as far as Q3 and Q4 are concerned. I can talk a little bit more about the Quick Win synergy, broadly, the answer is that, yes, there is confidence and momentum going from Q1 into Q2 as far as good development on the synergies are concerned, whether it's on the top line or on the OpEx, and this we expect to carry as far as the third and the fourth quarter of this year is concerned.
Thank you, Nakul Sehgal. My second question is regarding your depreciation and amortization expense. You say that you can save some CapEx from the business integration, you know, your depreciation and amortization keep rising. You know, the amount that we saw in the second quarter is gonna be, you know, any one-off or, you know, this can be the best for us to project your depreciation and amortization in the future?
Yeah. Can I request you to take the third question as well? Let me take it in one shot, please.
Okay. My third question is regarding the DIF. It would be great if you share us a little bit about what your strategic directions for the DIF. I think if you see, the market value of DIF has come down quite a lot over the past few months, which may reflect the market concern over your direction, your strategic direction on this one. Whether, what's your optimal holding stake on DIF in the long run? It's still be your funding alternative in the future. What's your thought on the lease renewal from when it come, probably in 2032 or 2033?
Also, another set of the question on the DIF is that, regarding your plan on the tower optimization, how can you decide which tower will be dismantled? You know, as you know, True has engaged with long-term lease contract with DIF. If you have, for example, two towers sitting together, DTAC tower and DIF tower, what's your thought? What's your determination on this one? It would be great if you shared with us. Thank you.
Thank you for a long list of questions, Khun Pisut. Let me take the second one first. This is on the depreciation and amortization. The high D&A in this quarter is basically resulting from CapEx investment that has happened in the last, you know, last quarter and maybe the last half of last year. This is basically coming on account of network expansion and the capacity enhancement that we have had to do to cater to the needs of the customers. There is also in this quarter, we see an impact on alignment of useful life between the two companies.
DTAC and True were having two different lives, and then we have done our effort to make sure that there is alignment on the useful life of the assets of the two companies, and hence there is some impact of higher depreciation on account of that. As far as the trend of depreciation and amortization is concerned, and you are absolutely right here, because of the fact that the CapEx investments that we are indicating for 2023 are lower than what were there historically. If you remember, historically, CapEx was THB 50 billion-THB 60 billion as far as the two companies are concerned, and now we are talking about THB 40 billion levels. There is a 25%-30% CapEx reduction in the first year itself. This basically augurs well for us to optimize the depreciation and amortization going forward.
However, as far as the next, the trend in the short term is concerned, maybe you can look at Q2 as the one, to base your, you know, your modeling on depreciation and amortization. Very soon, these trends are going to go down because the CapEx investments are going to be lower, as you have seen as far as 2023 is concerned. On DIF, I hand it over to Kunyupa. Yeah.
This is, there are many sub-questions with the DIF, issues. First of all, the percentage holding, you're asking about the optimal percentage holding or our policy about DIF. I would say that we don't have any specific optimal, percentage holding in DIF. We will always look at, returns, or We keep the DIF, we have the dividend. As a investor, we have the dividend yield, so we need to look at that. The second question is on the whether we will keep DIF as a funding vehicle. Definitely, DIF is the funding vehicles. If we believe that, we have assets, and we would like to monetize the asset to the fund, we may consider that.
In the future, when we complete our network single grid optimization, we know how much asset we have left, and then at that time, we also need to look at the cost of fund as well, compared to the other alternative. Regarding the renewal of the contract, as you may be aware, that our rental contract with DIF has another 10 year to go, 2033, which True Corporation has committed a lot to rent from DIF. It's firm commitment, it's now, it's too early to discuss about the renewal of the contract because it's another 10 years go. How do we decide which tower to keep, which tower to dismantle?
According to the DIF contract, if we dismantle DIF contract, tower, we need to find replacement tower to DIF, which mean that we need to keep number of tower. Actually, those tower that we already sold to DIF is DIF tower. If we would like to, you know, move the equipment and move to others, towers, we would consider replace the tower with DIF so that we can, you know, pay the rental and use that tower at the same time. Which tower to remain or maintain, which tower to dismantle, is based on the, first, the optimization, the signal optimization, right? Secondly, on the land lease extent. Because if the high land lease costs, it's likely for us to dismantle that tower, if we have the tower next to each other.
Those are the considerations that we will consider, whether which tower to keep. Bottom line is that, if we decided to move equipment out of the DIF towers, we would not rent a tower without using it. We will try to replace the tower to DIF. There will be no impact to DIF, but at the same time, we pay the rent, and we use the tower. Hope I answer all of your questions regarding DIF.
Yes, very helpful. Thank you very much, Kun. Thank you, Lap.
Thank you. We move on to Arthur. You can unmute and also turn on your camera.
Hi. Hi, good evening. Thanks. Several questions from me. Firstly, can you just clarify on the EBITDA outcome? Are you able to itemize which cost areas you can expect to reduce into the second half of this year? Any quantification that would be useful on the target. Second question was with regard to the taxes booked in Q2. Have all the deferred tax bookings been linked with amalgamation, been cleared out, or are there more charges to be incurred in the following quarters? Also related to that, do you need to book any further amalgamation costs into the following quarters on your G&A? Lastly, you mentioned rationalization within the market. I'm just wondering, are you able to provide color on what's happening on the industry price plan? Has that actually been going up?
I do know that you increased 1% quarter-in-quarter. When you look at it pre-COVID, 1% seems to be par for the course. Is there more to be seen in the subsequent quarters? Thank you.
Yeah, thanks. Thanks for the question, Arthur. Let me take, these four, right? The first one was. I can hear echo, but okay. Which areas do we foresee that are going to be optimized as far as the future is concerned because of the guidance?
Arthur, could you please mute? Yeah. Thank you.
Yeah. Because of the guidance that we've given. What you can safely assume is the ones that you see where the trend is towards the reduction, are the ones that we're going to continue to focus as far as the future is concerned. As far as the numbers is concerned, you know, if I just go back, we've seen that the SG&A has seen a decline, the network cost has seen a decline as well. These are the areas that we continue to focus on going forward as well. The efficiencies are definitely gonna come from internal operations, and also because we take the benefit of the pricing difference that is between DTAC and True, so that helps us in optimizing our costs. I can talk a little bit more about the synergies a bit later.
Your second one on deferred tax assets. The write-off that we've done on deferred tax asset pursuant to an internal restructuring is all that is gonna happen as far as this item is concerned. There is nothing more expected in the subsequent months as far as write-off of the deferred tax asset is concerned. It's a one-off effect. It's done and dusted. Your third question on amalgamation costs. I think the amalgamation cost, as we've historically maintained, is the cost of, you know, basically bringing the combined entity into shape. You know, legal fees, consultants, trying to work on pre-amalgamation, trying to work on the, you know, synergy models and integration, and so on.
This is the last that you will see as far as the significance of this amalgamation-related spends are concerned. Nothing is expected in the subsequent months. Focus in the subsequent months will be on integration-related expenses. The amalgamation is out of the picture. Any focus that we'll have in the future is on integration expenses, and that has to be looked at along with the benefit that we can get from the spends. The focus that we will have is the net benefit should be a positive for us. That's, that's how we will go and we look at the integration-related spends are concerned. Your last question on the pricing.
You know, you see that there is improvement in ARPU. You know, the improvement seems to be a little bit small as far as you are concerned. Please note that, I mean, to do a significant shift in the market on pricing takes a little bit of time, because a lot of customers are sitting on unlimited data packages that are there. What has been done so far in terms of price rationalization is the removal of unlimited data as far as the lower tariffs are concerned, specifically on the prepaid and the postpaid. We have worked extensively on the online business to reduce the discounts.
We've also introduced entry free to make sure that we get to a quality acquisition of subscribers, and that's why you see specifically on online, there was a significant, you know, 2.5% improvement in ARPU, which was about THB 13 that you saw. You know, all of these are early signs that the market is moving in the right direction. We are hopeful that this ongoing positive momentum in the business environment, in the macroeconomic situation, more tourists coming in, the inflation being low, overall economy is improving, the GDP is improving, is gonna help us in establishing a strong, you know, baseline as far as improvement in ARPU is concerned. Please also keep in mind, the 7%, 8%, 9% ARPU reduction that you've seen historically have been on account of factor factors.
One, of course, it was coming on account of aggressive competition. Second one was that the macroeconomic situation was quite bad because of the pandemic. The third one was that there was high inflation. All of these factors, these are relatively under control now, so the headwinds are not there. Now it's about the focus of the operators to make sure that they try and monetize from this. I hope this answers your questions, Arthur.
You're-
You're on mute.
Yeah. Thank you very much. Very clear. Sorry, just to clarify, were there any price changes implemented in the second quarter, or is that only expected in the subsequent quarters?
There was some price change, you know, that was done with respect specifically with respect to the fair usage policies, that are there. That have been made less lenient, so, and that obviously has been improving the ARPU as well. You know, once you take out the unlimited tariff from the market, it takes a little bit of time for it to go to a wider base. That has carried on this quarter.
You're muted, Arthur.
Sorry. What % of your base are still on unlimited that you need to roll over to the new plan?
It's still very significant. We don't disclose the number for competitive reasons. It's still quite significant.
Understood. Thank you very much.
Thank you, Arthur.
Thank you. We move on to Vasu. You can unmute, and please also turn on your camera. Hi, Vasu, can you hear me?
Move on next.
Okay. maybe we will come back to you soon, then we move on to Khun.
Yeah.
I will just allow your mic and camera. You can also unmute yourself, please. Yes, we can hear you.
You can hear me and you can... Oh, hi. Hi. I have four questions. I guess I ask them in one go. Number one, I agree with you that the competition is moving in the right direction, we no longer have the headwinds for the top line. Your top line is still on the soft side in the 1st quarter. How long do you think it would take before we start to see a turnaround in the revenue, maybe year-on-year-wise? Secondly, you talk about the depreciation alignment between DTAC and True. If I recall correctly, the depreciation period between the two companies is quite different, 10 years or almost 20 years.
When you say alignment, it is going to be more toward DTAC number, or it's going to be more toward True number in term of depreciation year? The third one, we start to see the integration cost in the second quarter. I'm not sure if you are ready to provide us some guidance on, you know, how much it would be and how long it would take, and how long before it become a
positive, you know, between the cost and then the benefit. Then the last question, just want to make sure that I understand you correctly in term of DIF. What you said is that even if you have to dismantle the tower that now belong to DIF, then near term is not going to have any impact on DIF because, you know, you have to replace it. Then my understanding is that the rental fee is regardless of the usage. Long term, it should not have any impact on DIF because, you know, you replace it with something similar. Is that, is that a correct understanding? Then, would DIF have to pay for any of the dismantle or it's going to be charged by True? That, those are the four question that I have. Thank you.
All right, Khun Ji, thank you for your question. Let me first take the one on the competition, and then I also take the one on the integration cost, and Khun Yupa will take the depreciation and the DIF part. As far as the competition is concerned, yes, you're right. As I mentioned, it's heading in the right direction. As we've indicated a few times earlier as well, I mean, it'll take time to move this in the right, you know, to move it with a significant set. Of course, we see some early signs that it's moving in the right direction. That's why Q1/Q there is an increase.
When you do a comparison on an year-on-year basis, you will see that the second half of the year, as compared to the second half of last year, will definitely be positive. That's why we're indicating a flat for the full year, because the first half is negative, the second half will be positive. Overall it's gonna be more or less flat. This is something that you can keep in mind. As far as the integration cost is concerned, we don't, I mean, we have indicated integration cost of roughly THB 250 million that is coming below the EBITDA. This number is expected to be for the full year, around THB 1 billion-ish, THB 1 and a half billion-ish.
This definitely gives us benefit above the EBITDA on the cost reduction. The way we have given you the guiding for the year on EBITDA factors in all benefits on integration and all other costs that needs to be booked as well. We have not indicated, you know, what is the gross synergies that are coming, and, you know, for that, we'll come back to you as and when we organize a, you know, full structured process to explain to you the total synergies that are gonna come from the transaction. Basically, the 2023 numbers gives you an indication of where we are trending as far as, you know, as far as the synergies are concerned.
Maybe I can also take this to explain a little bit more on the synergies that we are getting in Q2, because a reference to the cost is not enough, while we do not talk about the synergies. Basically, there are gonna be four areas where the synergies that we've already seen in Q2, and we will see in the subsequent quarters as well. First is definitely on the revenue and the commercial areas. We've spoken about upselling and cross-selling the customers of DTAC to the converged offering that True has, and upselling and cross-selling True's customers to the beyond connectivity services that DTAC has. This is something that is you'll see on the top line. Secondly, rationalization of product portfolio.
Pursuant to the easing of competition and market rationalization, there is also synergy benefit that we can see from this transaction, where, as I mentioned, the unlimited tariffs are taken out, high discounts are removed, and entry fee kind of things are introduced as well. The second one is on operational, you know, efficiency, which are basically benefits on coming on account of streamlining the organization, the office space, the admin expenses, and so on and so forth. Third one is on procurement. You know, now we are able to appreciate procurement a lot more because now we have data from both companies on the cost that they pay to the vendors as for a similar product and service.
Taking the benefit of best prices of DTAC and True actually, you know, enables us to reduce our cost. This helps in the CapEx as well, and that's why you see the CapEx reduction. The next step on procurement will definitely be how we can use the scale to our advantage to drive the cost further. Last but not the least, you know, in Q2, as we mentioned, we've achieved about THB 3 billion on synergies as far as optimization of CapEx is concerned. Like Kun Manop, I think, shared, a major milestone on network modernization, or the single grid has also been reached. This is basically on where the synergies are coming. All of this is net of the costs that we have already incurred. Over to you, Khun Yupa.
Yeah. As for the useful life of asset alignment, our exercise that before we adjust the useful life of the asset, we have our engineering teams study the useful life of the asset and set that as the new useful life of those assets. As a result of this study, we are moving towards somewhere between True and DTAC. However, because of the asset base of True is bigger than DTAC, that's why it's impact the depreciation, as Kun already mentioned. Due to our alignment have some impact on the increased depreciation and amortization.
Yeah.
The next one is on the dismantle cost of the tower.
As I explained earlier, if we have a tower next to each other, DIF tower and our towers, we don't want to pay the rentals and also maintain our own tower, pay land lease and maintenance. We will dismantle one towers, and we are the one who responsible for the dismantle, because it's our responsibility to, you know, dismantle our tower or dismantle DIF tower and replace the tower with our tower, in that case. It means that two towers need to reduce to one, and we are the one who decide and talk with DIF to replace the tower, so that we can fully utilize the tower, reduce the land lease, reduce O&M, and also pay the rent and use the tower. That is our objective. Meaning that we will be the one who responsible for dismantle of the tower.
Thank you.
Yeah, that's really clear. Thank you very much. That's all the question I have. Thank you. Thank you, Khun Ji.
Thank you, Khun Ji. We have some questions in the chat box. Let me start with Piyush. As vendors are appointed, could you talk about network integration plans and key milestones to watch? When is network integration likely to complete?
Could you share?
Could you share midterm target for net debt to EBITDA and levers to achieve?
Okay, sir. Okay, thanks for the question, Piyush. As far as this network, we call this a single grid. Just to give you a perspective here, a merger of two telecom networks of the size of DTAC and True happens once in a lifetime in the history of any country. Alongside the major global OEMs that are there, we've been able to negotiate a win-win deal, which will enable True Corp to build a single, integrated, state-of-the-art and future-ready network within the next 2-3 years. Basically enabling us to become the undisputed network leader in Thailand, thereby providing a fantastic experience to the customer with modernized 5G network. All of this is expected to yield significant synergy benefits for us.
Of course, the price that we've been able to negotiate is significantly better than what we expected as well, because of the fact that, you know, we've been able to get a great deal in a record time of four and a half months as well. The execution is gonna start right away. We, in fact, we've, you know, today we've got the blessing of the board, and, now we are gonna get full throttle started on executing as far as this is concerned. These things typically take about two to three years. Our objective is definitely to see how we can accelerate this in as fast as possible time, giving the best experience to the customers at the same time, and also making sure that we realize the synergies in the best possible way.
This is how we're gonna plan it. You know, this is the basically high level that I can share as far as this transformation is concerned. You had another question on, Yupa?
Mid-term target for net debt to EBITDA and how to achieve it.
All we are indicating you right now is the guidance as far as 2023 is concerned. For any mid to long-term perspective, you know, you'll have to wait for us to come back as we organize that, you know, the day when we walk you through this amount of synergies in detail and our mid to long-term ambitions. You'll have to wait for that a little bit, please. Yes. Thank you.
We have some more questions. This is from Milling. Can you describe more about DTN, which made the tax higher?
DTN, Khun Yupa.
Kunyupa. Deferred tax.
Yeah. Okay. Can you tell me the question?
It's, yeah, sorry.
Yeah, okay. This is a deferred tax asset that is recorded on the carry-forward losses of DTN, which, pursuant to an internal restructuring within the company, cannot be utilized in the future. Like I said, it's a non-cash effect. It's just reversal of a deferred tax asset that is created, which we cannot utilize in the future. That's how we should see it.
Okay. Next we have Izzati from Macquarie. Can you talk about what is the cost below EBITDA of THB 250 million this quarter? That's the first question. Second is, True board approved THB 280 billion bonds to be issued. How long will this be done, one year or a few years? Third question, can you give some color on free cash flow trajectory for Q and 2Q and the rest of the year?
Thanks for the question, Izzati. As far as the integration cost below EBITDA of THB 250 million is concerned, these are basically related to, you know, operating efficiency of the company. There are some costs that are, from accounting purposes, are recorded above the above EBITDA. There are some that go below EBITDA. These are the ones that we're calling out, which are not included in the guidance as far as the EBITDA is concerned. This is basically operational efficiency. Some contracts are onerous. As and when you exit off the contracts, you have to pay some one-time settlement, and this is basically the THB 250 million that you see as far as this quarter is concerned. As far as bonds, Kunyupa?
As for the bond program, where the shareholders already approved THB 280 billion bond programs, this is basically to replace the bond program of True Corporation before the amalgamation. Right after the amalgamation, even the name is True Corporation, but it's a new company. It means that we need to start over, everything start new, as a new company. We need to submit the MTN programs. We need to have the shareholder approval for the remit of bond. The THB 280 billion is a total bond under True Corporation, which mean that in our funding plan, we plan to concentrate all the funding to the top co, which is the True Corporation.
Whereby before the amalgamation, DTN itself issue bond, True Corporation, the parent company before the amalgamation, issue bond, and we also have TUC as a subsidiary of True, issue bond as well. After the amalgamation, what we will do is that we will concentrate all bond issuance under the top co or the parent company, True Corporation. Meaning that the bond of DTN and TUC, once expire, we will roll over using True Corporation. That's why the THB 280 billion to support this roll over of subsidiary bond as well. And those THB 280 billion is MTN program last for 2 years. It doesn't mean that 1 year we will issue bond THB 280 billion. That is the limit for 2 years, and then we will roll over this program and get the shareholder approval again.
To answer, I think that there may be some answer, some question regarding the bond issue, the first bond issue, that we just issue bond this week toward the end of last week, and we already closed the first bond issuance in Monday. That is the first bond issuance of T-True, new True, under the THB 280 billion bond limits approved by the shareholder. You can imagine, the total bond issuance of True Corp is to refinance the bond become due. We will gatherly go out to the market to refinance the bond at the subsidiary level to True Corporation. 280, bottom line, is that is not the bond that we will issue within one year, for sure. Don't be scared. Thank you.
I'm mindful of time. We have three minutes left. Let's move on to Vasu. What is the network CapEx for the full quarter in 1Q23? Is there risk of competition becoming more aggressive later this year? Expected integration cost for the rest of the year, opportunity for True to renegotiate the lower rental expense with DIF, so that True can generate positive profit.
Yeah. Okay, thanks for the question, Khun Vasu. It's a pity that we could not hear you, but at least we can see your questions. Network CapEx for Q1 is already available in our first quarter results. It's about THB 17.6 billion. In fact, we have shown the number in the second quarter as well. We do not specify what is network and IT and other CapEx. The total CapEx was THB 17.6 in Q1 and about THB 3 odd billion in Q2. Whether there is a risk of competition becoming more aggressive, we do not see any signs of that.
That's why we said that, you know, at least the headwinds are actually behind us, and then we need to take the right actions, just to make sure that the customers, you know, perspective is kept in mind as well. The amalgamation cost. Okay. Amalgamation cost is over, and will there be integration cost? Yes, that's right. Integration. The integration cost, like I mentioned, was roughly THB 250 million. That's basically on the onerous contracts that were canceled. Estimation for full year or full 10 months is, as I indicated, is about THB 1 billion-THB 1.5 billion. Again, none of these costs will be incurred unless and until there is a benefit to us as far as the synergies.
Meaning, the synergies have to be higher than record these, kind of costs. As far as the last one, opportunity for True to negotiate lower rental expense, like Kunyupa mentioned, right? I mean, we are bound by the contract that's there until 2023. I repeat, we stand by the commitment on the contract that we have for DIF for the period until 2023, 2033.
Arthur, I believe you raised your hand first, so please go ahead.
Yeah. Hi, sorry, just two follow-up questions. Firstly, on the CapEx guidance of THB 25 billion-THB 30 billion. Is this committed CapEx or cash CapEx? I recall you had some payables on this before. Second question is just on the interest. I do know it is up 7% quarter-in-quarter. Debt, I think, is fairly stable. What's driving that increase? This is the new baseline. Thank you.
Yeah, this is the last question. We are out of time, but we take it. Arthur, can you mute, please? This is, this is booked CapEx. I mean, we expect to book THB 25 billion-THB 30 billion for the 10-month period. The payment obviously happens based on the payment milestones, which are different for different kind of customers. What we've done as part of the single grid or the network RFP, is we've been able to negotiate significantly better payment terms than they were already in the company. You know, the payment terms of the company were already good. We've been able to negotiate even better. Just to answer your question in brief, it is the recorded CapEx, and it's not the cash CapEx for us. Your second question was... Arthur?
Sorry, Arthur, could you repeat?
Question is on interest charges. It's up 7% quarter-in-quarter, although.
Yeah. Got it. Yeah. you know, very brief, in the first quarter, we got a THB 350 million, income, interest income, which was recorded in the net financial cost, because of the settlement of the litigation that we had in Q1. If you normalize for the THB 350 million, the cost is more or less, flat on a Q1Q basis. This one-off is already disclosed in the presentation as an appendix slide, so you can just refer there.
We are out of time. That would be the last question. Thank you, everyone. If you have questions we were unable to answer, please reach out to me or the IR team, we will get back to you. Thank you. Long weekend in Thailand, happy weekend to everybody in Thailand, we hope to hear from you soon.
Thank you.
Bye. Have a good holiday.
Thank you.
Thank you. Bye.