MANAGEMENT DISCUSSION AND ANALYSIS FY 2016
MD&A
Executive Summary
FY16, Thai mobile industry continued to grow, driven by mobile Internet services. dtac expanded 4G networks nationwide to secure the leading 4G position, improved network perception and continued transferring subscribers to licensed networks. However, competition in the industry remained intense, particularly on handset subsidies to attract and retain subscribers. Moreover, data monetization was still an industry challenge as strong growth in data consumption outpaced data revenue development.
dtac affirmed a strong spectrum portfolio with bandwidth of 50MHz currently in use. With CAPEX spending of THB 20 billion in FY16, we increased the total number of 4G base stations to 21.8k, up from 6.3k last year, resulting in coverage of 4G services in every district throughout Thailand. Furthermore, in highly populated areas, we deployed 20MHz bandwidth of 1800MHz frequency for 4G services, called "Super 4G", to enhance customer experience. In addition to network development, we implemented many campaigns to strengthen network perception, value-for-money position, and digital brand image, including the launch of the new "dtac prepaid" brand. With the ambition to become no. 1 digital brand in Thailand by 2020, we delivered new digital experiences to customers throughout the year, including the "dtac MUSIC INFINITE" service and Voice-over-WiFi technology.
In FY16, our postpaid revenues grew 10.5%YoY while prepaid revenues decreased 9.5%YoY. The prepaid segment faced many challenges, including widespread handset subsidies, aggressive MNP campaigns, and subscribers
upgrading to postpaid. As the postpaid growth could fully not offset the prepaid contraction, service revenues excluding IC decreased 2.3%YoY to THB 64,693 million. Data services continued to be the growth driver, thanks to 4G network expansion, attractive smartphone deals, and popularity of social media and streaming services.
Despite lower service revenues and higher handset subsidies, FY16 EBITDA (before other income and other expenses) amounted to THB 27,915 million, relatively stable from last year, mainly supported by lower regulatory cost and implementation of operation excellence programs, such as IP Transit and IDD cost optimization. Our financial position remains flexible for future investment, with net debt to EBITDA of 1.1x, compared to 1.4x last year. However, net profit of FY16 decreased 65% to THB 2,086 million mainly due to an increase of depreciation and amortization (D&A) following the network expansion.
Aiming to be the no. 1 digital brand by 2020, dtac will strengthen its digital brand perception, deliver more digital services and build consumers' confidence in our mobile network. We plan to spend FY17 CAPEX in a range of THB 17-20 billion to densify network and enhance Internet experiences. As industry competition is likely to continue, our FY17 service revenue is expected to be about the same level as in FY16 supported by improving network perception and value-for-money offers. We expect FY17 EBITDA to be at least the same amount as in FY16, supported by financial discipline and operation efficiency initiatives.
Significant Event
Impairment of assets on the separate financial statementsIn Q416, dtac performed impairment test of the deferred right to use of equipment and the equipment for supporting cellular telephone services (Concession Agreement) by comparing the carrying amount of the cash generating unit to its recoverable amount. As a result, we recognized non-cash loss from the asset impairment totaling THB 5,185 million in the separate financial statements. There was no impact on the consolidated financial statements. (Please see notes in FY16 financial statement for more details)
Operational Summary
At the end of FY16, total subscriber base was 24.5 million, decreasing from 25.3 million last year. The decrease was due to lower prepaid subscriber base as dtac was cautious in providing subsidies on prepaid handset amid massive amount of such subsidies being poured into the market by competitors. Meanwhile, postpaid subscriber base increased to 5.0 million from 4.3 million last year underpinned by successful prepaid-to-postpaid campaigns and value-for- money offers. In Q416, the total subscriber base decreased by 340k from Q316 as postpaid net addition of 207k was not sufficient to offset prepaid subscriber decrease of 548k.
During 2016, transition from concession to license regime continued. Subscribers registered on 2.1GHz licensed network increased to 95% of total subscriber base,
compared to 90% last year. Nationwide 4G network expansion, proliferation of streaming services, and more affordable devices drove smartphone penetration to 68%, compared to 61% last year. In addition, penetration of 4G users increased to 20% (5 million), while penetration of data users increased to 62% (15.2 million).
Due to the higher proportion of relatively higher-ARPU postpaid subs, blended Average Revenue per User excluding IC (ARPU) increased 5.9% to THB 216 in FY16. In Q416, blended ARPU was THB 220, increasing 0.6%QoQ, and stable YoY. Blended Minutes of Use excluding IC (MOU) continued to decrease due to substitution effect from voice to data, including Voice over IP.
MANAGEMENT DISCUSSION AND ANALYSIS FY 2016 | ||||||||
Active subscribers (in thousand) | Q415 | Q316 | Q416 | %QoQ | %YoY | FY15 | FY16 | %YoY |
Postpaid (under concession from CAT) | 561 | 456 | 412 | -9.6% | -27% | 561 | 412 | -27% |
Prepaid (under concession from CAT) | 2,089 | 1,074 | 815 | -24% | -61% | 2,089 | 815 | -61% |
Postpaid (under 2.1GHz license ) | 3,763 | 4,362 | 4,613 | 5.8% | 23% | 3,763 | 4,613 | 23% |
Prepaid (under 2.1GHz license ) | 18,840 | 18,928 | 18,640 | -1.5% | -1.1% | 18,840 | 18,640 | -1.1% |
Total | 25,252 | 24,820 | 24,480 | -1.4% | -3.1% | 25,252 | 24,480 | -3.1% |
Net additional subscribers (in thousand) | Q415 | Q316 | Q416 | %QoQ | %YoY | FY15 | FY16 | %YoY |
Postpaid | 208 | 195 | 207 | 6.0% | -0.4% | 474 | 702 | 48% |
Prepaid | 192 | -328 | -548 | -67% | -385% | -3,231 | -1,473 | 54% |
Total | 400 | -132 | -340 | -158% | -185% | -2,756 | -772 | 72% |
MOU (minutes/sub/month) Q415 Q316 | Q416 | %QoQ | %YoY FY15 | %YoY | ||||
Postpaid 318 285 | 276 | -3.0% | -13% 332 | -14% | ||||
Prepaid 192 146 | 138 | -5.1% | -28% 190 | -19% | ||||
Blended 213 171 | 165 | -3.7% | -23% 211 | -16% | ||||
Postpaid excluding IC 231 201 | 194 | -3.4% | -16% 240 | -15% | ||||
Prepaid excluding IC 157 114 | 107 | -6.1% | -32% 156 | -22% | ||||
Blended excluding IC 169 130 | 124 | -4.7% | -27% 168 | -19% | ||||
ARPU (THB/sub/month) Q415 Q316 | Q416 | %QoQ | %YoY FY15 | %YoY | ||||
Postpaid 542 556 | 556 | -0.1% | 2.6% 556 | -0.9% | ||||
Prepaid 178 162 | 159 | -1.9% | -11% 166 | -2.2% | ||||
Blended 238 234 | 235 | 0.5% | -1.2% 222 | 4.0% | ||||
Postpaid excluding IC 519 524 | 524 | 0.1% | 1.0% 530 | -2.2% | ||||
Prepaid excluding IC 162 151 | 148 | -1.9% | -8.7% 149 | 1.4% | ||||
Blended excluding IC 220 218 | 220 | 0.6% | -0.1% 204 | 5.9% |
Financial Summary
RevenuesIn FY16, total revenues amounted to THB 82,478 million, decreasing 6%YoY due to lower service revenues and handset sales. Service revenues excluding IC amounted to THB 64,693 million, decreasing 2.3%YoY, mainly driven by the decline in voice revenue, partly offset by the growth in data revenue. In Q416, service revenue excluding IC amounted to THB 16,023 million, a decrease of 3.6%YoY and 1.1%QoQ, due in part to subdued macro environment and challenges in prepaid segment.
Voice revenues amounted to THB 22,953 million, decreasing by 22%YoY due to continuing voice to data substitution effect after subscribers adopting smartphones. Data revenues amounted to THB 35,744 million, an increase of 16%YoY, driven by increasing data users and average data usage per subscriber following improvement in networks and growth of streaming services. However, data monetization challenge still remained due to intense market competition. Contribution of data revenues increased to 55.3% of service revenues excluding IC, up from 46.4% in FY15.International Roaming (IR) revenues amounted to THB 1,168 million, decreasing by 13%YoY due to competition, alternative services, and one-time adjustment of inbound revenues.
Other service revenues amounted to THB 4,829 million and decreased 1.2%YoY. In Q416, other service revenues were stable QoQ but decreased 7%YoY due to lower IDD revenues. Handset and starter kit sales amounted to THB 12,181 million, decreasing by 21%YoY mainly due to lower number of iPhone units sold and higher handset subsidy in responseto industry competition. As a result, the net loss in handset and starter kits sales of FY16 was THB 2,505 million, increasing from the net loss of THB 1,961 million in FY15. In Q416, handset and starter kit sales decreased 23%YoY to THB 4,064 million due to the lower number of iPhone units sold and campaigns supporting prepaid-to-postpaid upgrade. However, handset and starter kit sales in Q416 increased 108%QoQ due to the launch of new iPhone models. The net loss in handset and starter kits in Q416 was THB 835 million, increasing from a net loss of THB 629 million in Q316 and a net loss of THB 54 million in Q415 due to handset campaigns such as iPhone offers and the "dtac best deal".
Cost of Services Cost of services excluding IC amounted to THB 41,850 million and increased 6.5%YoY, driven by higher depreciation & amortization and network operating expenses, partly offset by lower regulatory cost. Regulatory costs amounted to THB 10,472 million and decreased 14%YoY due to larger proportion of 2.1GHz subscribers in the total base, higher 2.1GHz handset penetration, and DR rate adjustment. As a result, regulatory cost to service revenues excluding IC decreased to 16.2% from 18.3% last year. In Q416, regulatory cost amounted to THB 2,574 million, increasing 1.8%QoQ due to higher data usage roaming on concession networks. Network OPEX amounted to THB 5,900 million, an increase of 12%YoY, mainly due to 4G network expansion. The total number of 4G nodes (both 1800MHz and 2.1GHz) increased by 244%YoY to 21.8k by end of FY16. As a result, our 4G services were available in every district throughout Thailand.MANAGEMENT DISCUSSION AND ANALYSIS FY 2016
In Q416, network OPEX was stable QoQ and increased 12%YoY.
Other operating costs of services amounted to THB 3,333 million, decreasing 23%YoY mainly due to lower IP transit cost and IDD cost. Depreciation and Amortization (D&A) of costs of services amounted to THB 22,145 million, increasing 26%YoY due to network expansion on both the 2.1GHz licensed network and the 1800MHz/850MHz concession networks. Selling, General and Administrative Expenses (SG&A) SG&A expenses amounted to THB 17,796 million, increasing 5.5%YoY mainly driven by restructuring cost and higher S&M expenses to respond to market competition. Selling and Marketing (S&M) expenses amounted to THB 7,192 million, increasing 4.2%YoY to support selling activities, strengthen brand perception and customer relationship programs, including "Blue Member" and "dtac rewards". As a result, S&M expenses, as a percentage of total revenues, increased to 8.7%, compared to 7.9% last year. In Q416, S&M expenses decreased 14%YoY mainly due to lower media spending, but increased 5.5%QoQ due to seasonality. General administrative expenses amounted to THB 8,887 million, increasing 14%YoY. Normalized, the general administrative expenses excluding restructuring costs increased 7.7%YoY due to channel expansion, IT expenses and impairment of assets. Provision for bad debt amounted to THB 725 million, decreasing 25%YoY mainly due to provision made following the expiration of prepaid registration in last year. EBITDA and Net Profit EBITDA (before other income and other expenses) amounted to THB 27,915 million, being stable from FY15 level as higher handset subsidy and lower service revenues were offset by lower regulatory cost and cost efficiency programs. EBITDA margin was 33.8%, improving from 31.8% last year. The increase in EBITDA margin was mainly driven by lower regulatory cost and other operating costs of services. Excluding handsets and starter kits, the EBITDA margin was 43.3%, improving from 41.3% last year. Net profit amounted to THB 2,086 million, decreasing 65%YoY largely due to higher depreciation and amortization and restructuring cost, partly offset by the stable EBITDA. In Q416, we reported a net profit of THB 30 million, a decrease of 97%YoY and 95%QoQ, mainly due to the higher depreciation and amortization and handset subsidy. We also recorded restructuring cost of THB 146 million in Q416. Balance Sheet and Key Financial Information At the end of FY16, total assets amounted to THB 115,369 million and increased from THB 111,044 million last year due to higher cash and PPE. Cash and cash equivalent amounted to THB 18,293 million and increased from THB 10,121 million last year mainly due to lower amount of dividend payment. Interest-bearing debt amounted to THB 49,165 million and increased from THB 48,000 million last year. Net debt to EBITDA was lower to 1.1x from 1.4x last year due to higher cash on hand.Operating cash flow (defined as EBITDA - CAPEX) amounted to THB 7,605 million, decreasing by 1.5%YoY. We spent CAPEX of THB 20,310 million, in line with FY16 guidance.
Statement of financial position (THB million) | End of FY2015 | End of FY2016 |
Cash and cash equivalent | 10,121 | 18,293 |
Other current assets | 16,153 | 13,608 |
Non-current assets | 84,771 | 83,467 |
Total assets | 111,044 | 115,369 |
Current liabilities | 49,922 | 38,222 |
Non-current liabilities | 33,899 | 50,002 |
Total liabilities | 83,821 | 88,224 |
Total shareholders' equity | 27,224 | 27,145 |
Total liabilities and shareholders' equity | 111,044 | 115,369 |
Cash flows statement (THB million) | FY2015 | FY2016 |
Cash flows from operating activities | 28,100 | 30,706 |
Cash paid for interest expenses and tax | (3,324) | (4,080) |
Net cash flows from operating activities | 24,776 | 26,626 |
Net cash flows from investing activities | (23,572) | (17,392) |
Net cash receipt/(Repayment) - loan & debenture | 14,336 | 1,165 |
Dividend paid | (11,242) | (2,226) |
Net cash flows from financing activities | 3,094 | (1,061) |
Net change in cash & cash equivalent Increase/(decrease) | 4,297 | 8,173 |
Beginning cash & cash equivalent | 5,823 | 10,121 |
Ending cash & cash equivalent | 10,121 | 18,293 |
MANAGEMENT DISCUSSION AND ANALYSIS | FY 2016 | |||||
Income statement (THB million) | Q415 | Q316 | Q416 %QoQ %YoY | FY15 | FY16 %YoY | |
Voice | 7,084 | 5,463 | 5,046 | -7.6% -29% | 29,252 | 22,953 -22% |
Data | 7,899 | 9,340 | 9,502 | 1.7% 20% | 30,746 | 35,744 16% |
IR | 347 | 184 | 270 | 47% -22% | 1,336 | 1,168 -13% |
Others | 1,296 | 1,208 | 1,205 | -0.3% -7.0% | 4,887 | 4,829 -1.2% |
Service revenues ex. IC | 16,627 | 16,196 | 16,023 | -1.1% -3.6% | 66,222 | 64,693 -2.3% |
IC revenues | 1,206 | 1,124 | 1,093 | -2.7% -9.4% | 5,637 | 4,559 -19% |
Service revenues | 17,834 | 17,320 | 17,116 | -1.2% -4.0% | 71,858 | 69,252 -3.6% |
Handsets and starter kits sales | 5,280 | 1,949 | 4,064 | 108% -23% | 15,411 | 12,181 -21% |
Other operating income | 134 | 268 | 285 | 6.2% 112% | 483 | 1,044 116% |
Total revenues | 23,249 | 19,537 | 21,465 | 9.9% -7.7% | 87,753 | 82,478 -6.0% |
Cost of services | (11,475) | (11,671) | (11,922) | 2.1% 3.9% | (44,692) | (46,160) 3.3% |
Regulatory | (2,897) | (2,527) | (2,574) | 1.8% -11% | (12,112) | (10,472) -14% |
Network | (1,391) | (1,556) | (1,556) | 0.0% 12% | (5,277) | (5,900) 12% |
IC | (1,170) | (1,055) | (1,041) | -1.3% -11% | (5,386) | (4,310) -20% |
Others | (1,157) | (774) | (751) | -3.0% -35% | (4,312) | (3,333) -23% |
Depreciation and Amortization | (4,861) | (5,759) | (6,001) | 4.2% 23% | (17,605) | (22,145) 26% |
Cost of handsets and starter kits | (5,335) | (2,579) | (4,898) | 90% -8.2% | (17,372) | (14,686) -15% |
Total cost | (16,810) | (14,249) | (16,820) | 18% 0.1% | (62,063) | (60,846) -2.0% |
Gross profit | 6,439 | 5,288 | 4,645 | -12% -28% | 25,689 | 21,632 -16% |
SG&A | (4,926) | (4,114) | (4,368) | 6.2% -11% | (16,866) | (17,796) 5.5% |
Selling & Marketing expenses | (2,072) | (1,680) | (1,773) | 5.5% -14% | (6,905) | (7,192) 4.2% |
General administrative expenses | (2,274) | (1,986) | (2,234) | 12% -1.8% | (7,825) | (8,887) 14% |
Provision for bad debt | (303) | (206) | (130) | -37% -57% | (968) | (725) -25% |
Depreciation and Amortization | (276) | (242) | (232) | -4.1% -16% | (1,169) | (992) -15% |
Gain/(Loss) on foreign exchange | 58 | 7 | 7 | 7.0% -87% | (295) | 84 128% |
Interest income | 55 | 45 | 53 | 18% -3.1% | 136 | 170 25% |
Other income & share of profit from investment associated company | in26 | 16 | 19 | 19% -28% | 165 | 68 -59% |
EBIT | 1,653 | 1,241 | 356 | -71% -78% | 8,829 | 4,158 -53% |
Finance cost | (372) | (383) | (376) | -1.9% 1.2% | (1,384) | (1,567) 13% |
Income tax expenses | (283) | (199) | 50 | -125% -118% | (1,557) | (506) -68% |
Net profit attributable to equity holder | 998 | 659 | 30 | -95% -97% | 5,893 | 2,086 -65% |
EBITDA (THB million) | Q415 | Q316 | Q416 %QoQ %YoY | FY15 | FY16 %YoY | |||
Net profit for the period | 998 | 659 | 30 | -95% | -97% | 5,888 | 2,086 | -65% |
Finance costs | 372 | 383 | 376 | -1.9% | 1.2% | 1,384 | 1,567 | 13% |
Income tax expenses | 283 | 199 | (50) | -125% | -118% | 1,557 | 506 | -68% |
Depreciation & Amortization | 5,137 | 6,000 | 6,232 | 3.9% | 21% | 18,774 | 23,137 | 23% |
Other items | (50) | (16) | 168 | -1,160% | -437% | 339 | 620 | 83% |
EBITDA | 6,740 | 7,226 | 6,757 | -6.5% | 0.3% | 27,941 | 27,915 | -0.1% |
EBITDA margin | 29.0% | 37.0% | 31.5% | 31.8% | 33.8% | |||
EBITDA margin-excluding handsets and starter kits | 37.8% | 44.7% | 43.6% | 41.3% | 43.3% |
Long-term debt repayment schedule (THB million) at end of FY16 | Loan | Debenture |
In 2018 | - | 2,000 |
In 2019 | 12,600 | 1,500 |
In 2020 | 12,600 | 4,000 |
In 2021-2027 | 3,800 | 12,500 |
Key Financial Ratio | FY15 | FY16 |
Return on Equity (%) | 20% | 8% |
Return on Asset (%) | 5% | 2% |
Interest Coverage Ratio (times) | 7x | 3x |
Net debt to EBITDA (times) | 1.4x | 1.1x |
CAPEX to Total Revenue (%) | 23% | 25% |
Total Access Communication plc published this content on 30 January 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 30 January 2017 12:09:06 UTC.
Original documenthttp://ir.listedcompany.com/tracker.pl?type=6&id=565548
Public permalinkhttp://www.publicnow.com/view/389722B721607565229E5EA2C235913685FD4E6B