True's rating cut to "B3"
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Moody's Investors Service has downgraded True Corp's rating from "B2" to "B3", due mainly to weak earnings from mobile business and high capital expenditure.
The rating is also under review for further downgrade.
"The rating action reflects the prolonged character of True Corp's negative free cash flows (FCF), due to weak earnings from the mobile business and a high level of capital expenditures (capex). As a result, we expect its financial and liquidity profiles to remain under pressure in the coming 12-18 months," said Yoshio Takahashi, a Moody's Assistant Vice President.
True Corp's negative FCF rose to THB21 billion for the 12-month period ended September 2013 from about THB6 billion in 2011 and below Moody's
expectation. Moody's estimates that its negative FCF will likely remain at a similar level in 2014, given large capital requirements for 3G and the potential for additional spectrum fee payments following the 1.8 GHz spectrum auction in 2014.
Given the continued increase in debt, its leverage - as measured by adjusted debt/EBITDA - is likely to increase to approximately 6.5 times in the coming 12 months from 6.1 times for the 12-month period ended September 2013.
