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S&P sees Singtel associate Advanced Info Service losing rating headroom with spectrum win

ADVANCED Info Service's (AIS) rating would face negative pressure if the Singtel Thai associate's operating metrics weaken, or if its discretionary spending rises above S&P's forecast over the next two years, the credit rating agency said on Tuesday.

S&P Global Ratings said that AIS's spectrum wins "substantially diminish" its financial headroom for the rating, which is BBB+ with a stable outlook. It added that the report does not constitute a rating action. 

It is expecting AIS to fund the spectrum licence payments and related 5G capital expenditure (capex) using debt and internally generated cash flow. 

As a result of the 5G network rollout, AIS's capex is expected to rise over the next few years - averaging 30 billion baht (S$1.34 billion) to 32 billion baht annually, compared with a capex of 23 billion baht in 2019.

"We do not anticipate a significant payback from the new spectrum investment over the next two years because 5G applications are still in varying degrees of development," the report added.

S&P said it believes the new spectra are needed for AIS to maintain its market leadership in Thailand. AIS's main competitors, True Move H Universal Communication and Total Access Communication, had also participated in and won licences at the same auction.

On Feb 16, 2020, Thairlan's National Broadcasting and Telecommunication Commission auctioned 48 5G spectrum licences. Of these, AIS won 23 for a total bid price of about 42 billion baht. 

Singtel shares were trading at S$3.17 as at 5.08pm, four Singapore cents or 1.3 per cent lower on Tuesday.