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Edited Transcript of ADVANC.BK earnings conference call or presentation 6-Feb-20 11:30am GMT

Q4 2019 Advanced Info Service PCL Earnings Call

Phayathai Feb 18, 2020 (Thomson StreetEvents) -- Edited Transcript of Advanced Info Service PCL earnings conference call or presentation Thursday, February 6, 2020 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Nattiya Poapongsakorn

Advanced Info Service Public Company Limited - Head of IR & Compliance

* Somchai Lertsutiwong

Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director

* Tee Seeumpornroj

Advanced Info Service Public Company Limited - Chief Finance Officer

* Weng Cheong Hui

Advanced Info Service Public Company Limited - President, COO & Director

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Conference Call Participants

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* Arthur Pineda

Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research

* Colin McCallum

Crédit Suisse AG, Research Division - MD

* Nuttapop Prasitsuksant

Thanachart Securities Pcl, Research Division - Assistant Analyst

* Pisut Ngamvijitvong

Kasikorn Securities Public Company Limited, Research Division - SVP & Analyst

* Piyush Choudhary

HSBC, Research Division - Telecoms Analyst, South East Asia

* Ranjan Sharma

JP Morgan Chase & Co, Research Division - Analyst

* Thapana Phanich

TISCO Securities Co. Ltd., Research Division - Research Analyst

* Thitithep Nophaket

Phatra Securities Public Co. Ltd., Research Division - Director & Analyst

* Wasu Mattanapotchanart

CIMB Research - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Advanced Info Service FY 2019 Results Announcement Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. I'd now like to hand the conference over to the management team of Advanced Info Service. Thank you. Please go ahead.

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Unidentified Company Representative [2]

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Good evening, everybody. Thanks for joining AIS Fiscal Year 2019 Results Conference Call. I am (inaudible), Investor Relations Manager. I would like to introduce the management team joining us today. First of all, Khun Somchai, our CEO.

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Somchai Lertsutiwong, Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director [3]

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Hello.

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Unidentified Company Representative [4]

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Our President, Khun Hui Weng Cheong.

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [5]

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Hello everyone.

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Unidentified Company Representative [6]

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Our CFO, Khun Tee.

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [7]

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Hi, everyone.

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Unidentified Company Representative [8]

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And Head of IR and Compliance, Khun Nattiya.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [9]

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Good evening.

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Unidentified Company Representative [10]

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First of all, we will begin with short brief of our financial and operations performance. As AIS is under final period, before spectrum is auctioned. Therefore, we will not discuss any related view around 5G. Also, the financial guidance for fiscal year 2020 and outlook are not provided at this point. Pending the upcoming spectrum auction, we are expecting to provide guidance later on before the announcement of 1st Q 2020.

For the result of 2019, our business still grew 5% and set new core service revenue record over THB 140 billion. This was driven by mobile business with 4% growth and followed by 29% growth in fixed broadband business.

Postpaid, as the main driver for our mobile business, continued to add 900,000 subs as 4G users keep expanding. High growth in postpaid was from pre to post migration and handset discount campaign. Prepaid still under pressure with price competition as unlimited fixed speed package were relaunched again in second half 2019 -- sorry, second half 2019. The impact of prepaid unlimited plan, although caused some slowdown in postpaid new subscription as well as our effort to uplift price from the previous year's unlimited pack in postpaid. Overall data consumption still to grow 17% to 12.7 gigabyte per user, per month with 4G penetration rate reached 71%.

For fixed broadband, we added [more than 300,000 subs in 2019 and achieved subscriber] (corrected by company after the call) base of 1 million subs. With fixed-mobile convergence strategy to cross-selling across our mobile subscription base, fixed broadband continued to contribute 4% of AIS core service revenue. After its fifth year of operation, AIS Fibre started to contribute positive net profit in 2019.

For other service revenue, enterprise data service was the main driver to grow this segment. AIS PLAY also gained higher viewership and awareness and achieved 2 million active mobile users. Cost of service, net of TOT partnership grew 4%, driven by network expansion. However, cost of service to service revenue decreased from 49% to 48%. This was due to cost savings from lower rental on tower and 2G equipment. You could see details for cost saving of TOT partnership in Slide #7 for more details.

For profitability, EBITDA grew 6% at EBITDA margin of 42.8%, which is in line with our guidance. Net profit margin -- net profit after tax grew 5%. Capital expenditure was around THB 20 billion, compared to guidance, between THB 20 billion to THB 25 billion. With the mentioned performance, the Board of Directors approved the full year dividend payment. So for the second half, the dividend payment will be THB 3.56 per share. To be paid on April 22, this is equivalent to approximately 70% payout ratio.

On the next session, we would like to open the line for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your question comes from the line of Pisut Ngamvijitvong from Kasikorn Securities.

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Pisut Ngamvijitvong, Kasikorn Securities Public Company Limited, Research Division - SVP & Analyst [2]

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I have 5 questions. The first one is about your P&L numbers. Could you please explain the item regarding the loss on PP&E disposal at THB 331 billion in fourth quarter, what was it for? And where was it booked in your income statement? That was my first question.

My second question is on your -- on the prepaid competition, I just noticed that our telco launch, a new package for the February month, which is the smaller value package of 100 per month for 30 gigabyte value at 4 megabit per second downloading speed, which is quite generous. Can this imply the competition on prepaid segment get more intense in February versus in January and versus in the fourth quarter last year? And under your internal assessment view, this price plan hurt your prepaid ARPU in the first quarter and also in 2020?

My third question is on your dividend. Your first half dividend payout was at 73.3%. But your second half dividend payout was at 67.4%. What is the reason for the lower payout?

My fourth question is about your tower service agreement with TOT. Does Advanced get an exclusive right to use the entire space on the tower? What if TOT want to do some swap on the tower? What they need to do that they can use it freely or they have to pay something to do?

And my last question is about your latest arbitration case that you lost against TOT. If Advanced finally win the case at the Supreme Appellate Court (sic) [Central Administrative Court]. Will (inaudible) the favorable ruling affect the ex prime minister (inaudible)?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [3]

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We'll take the -- probably the second question on the prepaid side first.

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [4]

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For the second question, our prepaid pricing (inaudible) for 30 gigabit, that's a fixed quarter price plan. Yes, although it is quite attractive, but we don't think it will help largely on the prepaid revenue. I think the more important impact currently would be the fixed speed, unlimited at 4 Mbps and 10 Mbps. And more recently, our competition has also improved it's unlimited voice into this segment. So this will have a big impact on the prepaid area.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [5]

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Okay. I'll take the rest of the question. The loss on PPA -- PPE disposals that you mentioned, this is based on some outdated, old equipment...

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [6]

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Some old network equipment.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [7]

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Some old network equipment. We booked it under the SG&A. Secondly, on dividends, when we look at the payout ratio, we actually look at the full year EPS. So based on the full year EPS, we pay out according to the dividend policy, which is 70%. Tower service agreement, we do not have exclusive rights. So TOT will have the ability to be able to offer that to other operators.

On your last question, I don't think we will be able to comment on the related case to others.

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Operator [8]

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Our next question comes from the line of Arthur Pineda from Citigroup.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [9]

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Two questions from me, please. Firstly, can you clarify on the cost items, significant run-up in the fourth quarter for both marketing and admin expenses, how should we view this spike? And are these costs expected to extend into the subsequent quarter?

Second is on the revenue side, interconnection and TOT partner revenues -- partnership revenues dropped around 20% Q-on-Q, whereas your OpEx and TOT costs declined by just 2%. What's driving this mismatch? Was there any specific booking into the fourth quarter?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [10]

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Okay. Arthur, on admin and marketing side. Marketing side, besides the normal seasonality, there's also the campaigns that we run in the fourth quarter and also the expansion of the point redemption that we offer to our customers. So that is unlikely to be on a recurring basis. It's the provision of the point retention expansion that we have for our customers.

And on the admin side, there are also staff remuneration that we provided in the fourth quarter as well, that is also one-time. So it's unlikely to be on a recurring basis. For full year, I think we are still looking at the marketing expense in rate of between 5% to 6%. And that's normally what we spend.

On TOT -- on the network OpEx cost, if you recall, we now -- as we agree with TOT on the tower, we book this tower agreement on a broad basis, one at the top line and one at the cost line.

So this was the difference from last quarter because in the previous quarters, well, we booked some backward revenue and cost. So in this particular quarter, you see kind of a normalized number. So the anomaly was actually happened in the third quarter.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [11]

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Okay. So going forward, we should be looking at fourth quarter as the benchmark. Sorry, just a quick -- yes. So just on the staff remuneration that you mentioned on the fourth quarter. Is there a one-off booking that you've put in?

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [12]

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I think, basically, the fourth quarter, have a few kind of one-off items. One will be the promotion that we did when we entered into the 30th year of service. That campaign involve quite a bit of different kind of expenses, including some that went to consumers and some to our staff. So that will be -- yes, I think it's one-off. Apart from the uptick in the marketing spending, the normal market spending in the fourth quarter anyway.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [13]

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Understood. And the staff remuneration that was booked in 3Q, right?

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [14]

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In the 4Q.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [15]

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In the 4Q.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [16]

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In the fourth quarter. How much was it?

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [17]

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Not that much. Yes, I don't have a number right now.

But I think it's not significant. Yes.

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Operator [18]

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Our next question comes from the line of Wasu Matt from CIMB.

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Wasu Mattanapotchanart, CIMB Research - Analyst [19]

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I have 4 questions. #1 is your -- on your prepaid net adds of 350,000 net adds for the prepaid alone. That's quite impressive. Is it -- it seems like industry trend. Like how did you generate the net add of prepaid subs when you say that prepaid subscribers are continually migrating to postpaid subs. Is that because people buying new SIMs to take advantage of the unlimited data plan offering? So that's the first question.

The second question is on cumulative response because if I'm not mistaken, yesterday, DTAC launched unlimited data plan with the THB 150, same speed as before, 4 megabit per second. But now the plan is available to everyone, including DTAC's existing customers, like, I just would like to know like how are you planning to respond to DTAC's action? That's #2.

My third question is on the new item in the balance sheet, the unrealized adjustment value of the spectrum license is worth around THB 3.3 billion. So what is that about? Because we haven't seen that before in the previous year.

The fourth question is on the normalized EBITDA margin. Because normally, you would give like EBITDA margin before the rental revenue from TOT as well. Could you please give us the numbers for the fourth quarter and the full year of 2019 as well?

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [20]

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On the prepaid net add of our 300 K. Yes, the fourth quarter pricing for prepaid has been very aggressive with unlimited fixed speed of 4 mega bps and 10 mega bps. So you'll see a huge uptick in the prepaid, same for that -- during that period. Some of those also came from postpaid customers migrating over to prepaid, especially for the 10 mega bps with unlimited voice. And so, although, we do not do it for the whole quarter, we did it for the first 1 or 2 months in November and have taken that out from the market in December.

For Q4, so we do see an uptick in the traveler's SIM and the SIM2Fly. So this is a seasonal period for those prepaid overseas SIMs.

On the -- you mentioned the DTAC, THB 550 for 4 mega bps -- THB 150 for 4 Mbps to existing customers. I think they launched it in response to True, which actually did it in the early part of January to existing customers. We are looking at it. I think they will be also launching something similar in the next few days. In fact, i.e., tomorrow, they'll be launching it.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [21]

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On the EBITDA number, we do provide a normalized EBITDA number in the -- our MD&A on Page 5, so you may refer to that.

Just follow-on to the other question that you have.

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [22]

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The unrealized adjustment of the spectrum value that's relating to when we get the 700 last year, and there was a condition to the payment terms of the 900. This one who adjust with the part of 700 ones when we get the spectrum of 700. So it is actually nothing new. It has been in the balance sheet since last 2 quarters.

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Operator [23]

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Your next question comes from the line of Piyush Choudhary from HSBC.

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Piyush Choudhary, HSBC, Research Division - Telecoms Analyst, South East Asia [24]

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A couple of questions. Firstly, on postpaid segment competition. Could you elaborate on how the competitive intensity is? And what's the outlook for postpaid ARPU, plus handset subsidies?

Secondly, in your mobile revenue, how much of revenue is driven by inbound roaming or traveler SIM card? And how much is driven by outbound roaming? If you can throw light on that? And lastly, have there been any provisions made on the disputed claims by TOT of THB 31 billion?

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [25]

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I think for the postpaid segment, it has continued to be similar aggressiveness quarter-on-quarter. So there's no increase in the aggressiveness. What we see in the fourth quarter, all the aggressiveness has been in the prepaid segment.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [26]

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On your last question of the latest legal dispute provision, we do not provide any provision for that. We will go through the Central Admin Court anyway. So that's our normal legal procedure to go further.

Lastly, your another question on the roaming revenue. Normally, the outbound roaming now is becoming very small. So -- and inbound, also, they use a lot of our local SIMs. So the international roaming alone by itself is already less than 2%. But if we were to account for some of the local things of that, which increased quite a bit, we don't have the figures to disclose at this point.

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Piyush Choudhary, HSBC, Research Division - Telecoms Analyst, South East Asia [27]

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Sure. And any outlook for the handset subsidies in 2020?

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [28]

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Handset subsidy. I think the intensity is still the same. So we are matching the market. So I guess that this will continue in this quarter.

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Operator [29]

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Our next question comes from the line of Colin McCallum from Crédit Suisse.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [30]

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Two questions from me. One on the prepaid competition issue. I remember that there were -- the prepaid packages had included some unlimited voice, I think, in -- around November time. And from memory, I think it was kind of taken off again in early December, which was a positive. I think in what you said earlier, that's come back on again, could you tell me when the unlimited voice element of the prepaid packages came back on? Was that within fourth quarter? Or that's a negative development that's just happened again in the first quarter of this year? That's the first question.

Second question is on fixed broadband. Obviously, your revenue growth there is very strong. But you had said you're going to be quite careful there about entering into price competition, given the heavy low cost. ARPU has begun to creep down to the low 500s there. Is that becoming a concern, though, in terms of the amount of competitive intensity in that segment?

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [31]

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For the prepared competition, yes, you are correct that unlimited data with unlimited voice was introduced in November. It was withdrawn in December. But the number of our competition has reintroduced unlimited voice in January of this year. So I think we are looking at a situation that we might have to compete in the market from them.

For the fixed broadband, yes, we have a quite strong growth. And largely, there was this THB 299, 100 Mbps, both ways, which actually have put down the ARPU. For this year, we will be concentrating on value for customers. And we'll be trying to move up the ARPU by giving more value to our customers.

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Operator [32]

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Our next question comes from the line of Thitithep Nophaket from Phatra.

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Thitithep Nophaket, Phatra Securities Public Co. Ltd., Research Division - Director & Analyst [33]

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I have just one question. On the 700 megahertz last year and spectrum was supposed to be delivered to you in October. And then there was a news that there could be a few months of delay because of technical problem. Have the NBTC informed you when exactly the spectrum would be delivered?

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Somchai Lertsutiwong, Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director [34]

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They still don't inform in the -- anything change. You can still keep our net announcement in the past. However, we still wait and see. I think we call this still open on the new auction of 700 that should have kept our next administrative according to that time line.

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Operator [35]

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Our next question comes from Ranjan Sharma from JP Morgan.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [36]

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Couple of questions from my side. Firstly, on the guidance, even if the spectrum is auctioned this year, you probably won't see 5G networks for a while. Why does the auction prevented from giving a guidance on revenues and EBITDA margin?

Secondly, on the fixed broadband, you just said that you plan to add value to customers. I mean can you elaborate on what value can we add to customers beyond providing a higher speed plan?

Lastly, again, coming back to 5G, do you think that the fiber present in Thailand is sufficient? Or are we going to get into a cycle of extensive fiber build?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [37]

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Yes. Thank you, Ranjan. We have to be very careful in answering your question. But in terms of guidance, basically, because we now already entered into the final period of the 5G, so we like to wait until the auction is complete, so we can offer the full year guidance.

Yes, that's all we can say for now.

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [38]

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For fixed broadband, one of the value add that we'll be giving will be more on the fixed mobile convergence, okay? And besides that, also the video package that we have with the PLAYBOX. Currently, we are revamping the video package that we're offering for both the fixed broadband as well as for mobile. So we will be reducing the number of packages for content, and we'll be providing better value in terms of the content as well as the pricing, so that more of our customers can avail themselves to the content packages. So these are some of the things that we will be offering to our fixed broadband customers in addition to our mobile customers.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [39]

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Is your last question somehow relate to the 5G? Your question around the expansion of fiber because there's no 5G?

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [40]

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Yes. That's what I was asking. How much -- is the fiber in Thailand sufficient for 5G? Or are we going to get into a cycle of extensive fiber build?

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Somchai Lertsutiwong, Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director [41]

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I think, let's see, the result of auction for the (inaudible) is based on our implementation plan. Also, let's see the results. So we can communicate to you.

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Tee Seeumpornroj, Advanced Info Service Public Company Limited - Chief Finance Officer [42]

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But for -- to date, we have about 150,000 kilometers of fiber. So we are prepared for a hit. So if we do need to have additional capacity that we will add to the current 160 kilometers of fiber that we already have.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [43]

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Okay. Just one quick follow-up regarding the value to fixed broadband customers? When you talk about fixed-mobile convergence, video packages, that is discounting, right? I just want to give them a cheaper price while bundling more services together?

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [44]

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No, besides bundling for using higher-priced plan with more bundled included in, we will also be taking away some of those very aggressive plans that we have. For example, like 50% discount for 12 months. Some of those resulted in the low ARPU. So progressively, we'll be taking those up. And we hope that the market will also do likewise. We are actually seeing some indications in the market that the competition has also taken away some of the lower price packages.

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Operator [45]

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Our next question comes from Nuttapop from Thanachart Securities.

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Nuttapop Prasitsuksant, Thanachart Securities Pcl, Research Division - Assistant Analyst [46]

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Three questions. The first one is on the disposal loss that you mentioned about THB 330-something million. Am I assuming correctly that it should be in the admin and other items in your SG&A?

The second is on the provisions of the customer point redemption, would that be recurring every end of the year, I mean, like the -- to clear out all the points in the fourth quarter? Or is it just for this year only?

And the last one is on fixed broadband. I understand and I believe that you have saying that to breakeven of net profit in your fixed broadband business, you would need something around 2 million subscribers, but the -- probably just achieved 1 million and it started to have a positive net profit. What has changed from that point to now?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [47]

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Yes, disposal is booked under the admin. Point redemption, no, not on a recurring basis, the impact that you see financially. Lastly...

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [48]

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Lastly, I think we achieve higher profitability through reduction in cost of service and also the cost of the FBB. Over the past 2 years, we have been building a new -- the cost that -- including acquisition cost per customer as well as last mile and installation fee. So with that then we kind of see the profitability aspect of it.

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Operator [49]

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Our next question comes from Thapana from TISCO Securities.

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Thapana Phanich, TISCO Securities Co. Ltd., Research Division - Research Analyst [50]

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Just one question from me. So circling back to the TOT litigation issue, given that you've already settled a number of disputes with them last year, and your competitors seems to also be quite keen with their objective of settling all the remaining disputes with the government. Would AIS be open to the idea of settling this case outside of court? Or is this concession amendment dispute, something you expect will ultimately have to be fought all the way to Supreme Administrative Court?

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Somchai Lertsutiwong, Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director [51]

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(inaudible) like in this way, on the asset that we have with the TOT or even CAT, if some case, it will be a lesser number, like we use some of equipment and then we don't take it. That's all the things that we try to settle with, like the tower case or other cases. But you can see another case that we willing to go to arbitration or the court. That mostly, it can form the thing that (inaudible) as you see. This is the thing that everyone know that it's company's reward. Now they were -- they are the closer to logistics, AIS also are willing to (inaudible) instead of go to arbitration to have some issue that not fight them back or not doing the TOT.

So in summary, in the reasonable issue at Kaset we tried to (inaudible) and negotiate the same -- but on the case that no crap, we have to fight it in that way. But not mean you have to -- should be more comfort. That mean, as have a normal issue that have the crowd that we have to pay them.

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Operator [52]

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(Operator Instructions) The next question is a follow-up question from the line of Ranjan Sharma from JP Morgan.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [53]

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One quick follow-up. Can you remind us in the 5G documents for the different spectrum bands, are they -- what are the rollout requirements -- rollout obligations in 5G? And will that require a heavy 5G build?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [54]

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I -- we don't hear your question clearly, Ranjan, can you rephrase that?

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [55]

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Sorry, can you hear me now?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [56]

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We can hear, but it's not very clear. Can you speak slowly?

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [57]

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Is that better?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [58]

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I think it's better, yes. Thank you.

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Ranjan Sharma, JP Morgan Chase & Co, Research Division - Analyst [59]

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Okay. My question was, in the 5G spectrum auction, can you just remind us what the 5G rollout obligations are? And if that requires a heavy CapEx build?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [60]

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Okay. I -- we can only take the rollout requirements, but we cannot comment whether how much it relates to the CapEx. Basically, they have identified the EEC area. EEC area is some areas within 3 provinces in the Eastern seaboard. That area will need to be covered by 50% within 1 year time.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [61]

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Yes. Ranjan, we can send you an e-mail on that.

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Operator [62]

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Next follow-up comes from the line of Arthur Pineda from Citigroup.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [63]

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I've got a 5G question but separate from the upcoming auction. Can you remind us on the 3.5 gigahertz spectrum, what are the legal requirements for this to be auctioned? I understand it's still with Thaicom. When do you expect this to be made available to the market?

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Somchai Lertsutiwong, Advanced Info Service Public Company Limited - CEO, Acting Chief Strategy Officer & Executive Director [64]

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We don't know. We don't know exactly because Thaicom still (inaudible) frequency, which you don't know they have a player to negotiate to (inaudible) or until the contract concession end. And after that, what's there we still don't know.

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Operator [65]

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Next follow-up comes from Piyush Choudhary from HSBC.

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Piyush Choudhary, HSBC, Research Division - Telecoms Analyst, South East Asia [66]

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Questions. Firstly, on FBB. Could you remind us what are the medium-term subscriber targets over there?

And secondly, on postpaid, what percentage of subscribers are still on the fixed speed unlimited data plan?

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [67]

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I think the medium-term target, though, remain to be one of the key players within the FBB. So we will continue to look to expand this target. But I don't think we are keeping out the hard number at this point. Yes. But basically, we are looking at the household penetration. Our postpaid base, that represents the key areas within Thailand. So we would definitely look to expand in a significant way for the market share in this broadband. The percentage of subscribers still resting on the 60 unlimited of postpaid, that's around 15% to 20%.

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Operator [68]

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The next follow-up question comes from Colin McCallum from Crédit Suisse.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [69]

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Just a quick one, actually. Notwithstanding that you're not giving guidance, IFRS 16 implementation on 1st January 2020. Does that have any material impact on AIS's net profit line? I know it's a tiny thing, but are you expecting any material impact or not?

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Weng Cheong Hui, Advanced Info Service Public Company Limited - President, COO & Director [70]

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It has to define material or immaterial. But all I can say, wanting a picture. We think we do have some estimates, but I don't think we have the liberty to expand that now. What I can say is it's still usable. I think that the impact for the whole necessary model will be more or less the same. And for us, there will be changes to EBITDA number, net profit number. Material or not. To me, wanting the whole story. That's all I can say.

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Operator [71]

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(Operator Instructions) There are no further questions at this time. I will hand back to the management team for the closing remarks.

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Nattiya Poapongsakorn, Advanced Info Service Public Company Limited - Head of IR & Compliance [72]

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All right. Thank you, everyone. Stay tuned. And talk to you again next quarter. Good night. And also, please be safe, everyone, both in Thailand and outside.

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Operator [73]

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Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.