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RPT-Fitch Rates Thailand-based AWN's New Debentures 'AA+(tha)'
March 19, 2014 / 6:40 AM / 4 years ago

RPT-Fitch Rates Thailand-based AWN's New Debentures 'AA+(tha)'

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March 19 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings (Thailand) Limited has assigned Advanced Wireless Network Company Limited’s (AWN) senior unsecured debentures a National Long-Term Rating of ‘AA+(tha)'.

The debentures, which will total up to THB20bn, will be issued in eight tranches due in 2017, 2019, 2021 and 2024. The proceeds from the debentures will be used to fund capex and/or working capital. The debentures are rated at the same level as AWN’s National Long-Term Rating of ‘AA+(tha)’ as they constitute direct, unsecured, unconditional and unsubordinated obligations of the company.

KEY RATING DRIVERS:

Rating Equalised with AIS: The ratings of AWN are equalised with its parent, Advanced Info Service Public Company Limited (AIS; AA+(tha)/Stable/F1+(tha)), to reflect the strong links between AWN and AIS, as per Fitch’s parent and subsidiary rating linkage criteria.

AIS wholly owns AWN and fully controls the subsidiary’s management and operations. AWN was awarded a 3G licence in Thailand in 2012, and is clearly of strategic importance to its parent. AWN is being used as a vehicle to migrate AIS’s business and subscribers from the 2G concession scheme to the more transparent 3G licence system. AIS has provided substantial support to AWN, including personnel and assistance in operations and network development, which helps mitigate execution risk of the 3G rollout.

Major Contribution Expected from AWN: Fitch expects AWN to be a major revenue and EBITDA contributor to AIS, accounting for over 70% and 90%, respectively, after 2015. In the long run, AWN will become the principal constituent of AIS’s business once the majority of subscribers have migrated to 3G.

Weaker Standalone Credit Profile: AWN’s standalone credit profile will remain weaker than that of AIS in the medium term. A key constraint is AWN’s higher financial leverage. Fitch expects AWN’s funds flow from operations (FFO)-adjusted net leverage ratio to stay around 2.5x-3.0x in the medium term, compared with AIS’s consolidated leverage of below 1.5x. In addition, slower than-expected subscriber migration to 3G could lead to lower revenue and profitability, and slower-than-expected deleveraging.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

-An upgrade of AIS’s ratings

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

-A downgrade of AIS’s ratings

-Weakening in links between AIS and AWN, including a reduction of AIS’s stake in AWN

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