AIS, TOT to sign MoU before 900MHz auction

AIS is also keen to collaborate with the state agency on the 900MHz spectrum, besides the TOT’s 2.1GHz, the source added.

If AIS succeeds in getting the 900MHz licence, it plans to allocate 5MHz out of 10MHz of the band to provide 2G services to those who still want to mainly use voice service. It will lease TOT’s 2G network to provide the service. The balance 5MHz will be deployed to further expand its existing 3G service coverage nationwide.

AIS will use 15MHz of the 1800MHz it acquired from the auction last week to provide 4G service to data-hungry subscribers, which will offload the heavy traffic on its existing 3G-2.1GHz service.

It also plans to allow TOT to roam with the company’s 3G-2.1GHz base stations nationwide, which will enable TOT to expand its 3G service coverage from day one of their collaboration.

Last week, the TOT board officially selected AIS as TOT’s 3G-2.1GHz partner for 10 years. The board also ordered TOT to sign an MoU with AIS first. 

AIS said in its proposal to TOT that the agency would earn revenue of Bt4.5 billion per year from the partnership. Of the total, Bt3.9 billion will be a cash payment every year and Bt600 million is from the cost of AIS managing TOT's 5,320 third-generation base stations.

TOT will wholesale 80 per cent of the 3G bandwidth on all TOT’s existing base stations and the planned ones to AIS. TOT will wholesale the remaining 20 per cent to other companies. AIS still has a good chance to access TOT’s existing 60MHz of 2.3GHz. Under their 2.1GHz partnership, TOT has reserved the right for AIS to be the first operator it will talk with on possible collaboration on 2.3GHz.

According to Fitch Ratings, AIS should have sufficient buffer to support the 4G-1800MHz investment, although its credit metrics are likely to deteriorate, which will reduce its rating headroom. The final prices for the 1800MHz licences were significantly higher than Fitch’s expectation.

Advanced Wireless Network of AIS, and True Move H Universal Communication of True Corp each won an 1800MHz licence by offering Bt41 billion and Bt39.8 billion respectively, compared with the starting auction price of Bt15.9 billion.

The National Broadcasting and Telecommunications Commission telecom committee endorsed the bid outcomes yesterday and asked both winners to pay the first instalment equal to 50 per cent of total price upfront next Monday. According to Fitch, if competition in the 900MHz spectrum auction is equally intense and AIS acquires the spectrum at a significantly higher price than Fitch expects, Fitch may consider negative rating action should the company's funds flow from operation (FFO)-adjusted net leverage rise above 1.5:1.

The high upfront spectrum fee and sustained high capital expenditure for network expansion will raise net debt for most telcos, and thus their financial leverage is likely to deteriorate over the next two years. Free cash flow will be negative as these operators are likely to maintain high dividend payouts.

Fitch estimates AIS’ FFO-adjusted net leverage will rise by 0.5 times over the next two years due to the additional investment in the 1800MHz spectrum. At end of the past nine months, FFO-adjusted net leverage for AIS has remained low at 0.8 times.