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Edited Transcript of DTAC.BK earnings conference call or presentation 20-Apr-17 11:00am GMT

Thomson Reuters StreetEvents

Q1 2017 Total Access Communication PCL Earnings Call

Bangkok May 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Total Access Communication PCL earnings conference call or presentation Thursday, April 20, 2017 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Lars-Aake Valdemar Norling

Total Access Communication Public Company Limited - CEO and Director

* Sverre Pedersen

Total Access Communication Public Company Limited - CFO

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Conference Call Participants

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* Colin McCallum

Crédit Suisse AG, Research Division - MD

* Gopakumar Pullaikodi

Nomura Securities Co. Ltd., Research Division - Regional Head of Telecommunications Research

* Prem Jearajasingam

Macquarie Research - Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Total Access Communication PLC Q1 2017 Results Call. At this time, I would like to turn the conference over to Mr. Sverre Pedersen. Please go ahead, sir.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [2]

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Thank you very much. Welcome, everyone. Q1 '17 highlights for dtac, we report 24.3 million subscribers in total after Q1. We have an increase then in postpaid of 195,000, but a decrease on prepaid with 365 and then we have a net 170,000 down overall, reflecting our focus on growing the postpaid business. Also, in line, we have 95.8% of the subscriber base registered under DTN and 1 million left under dtac, quite terribly below then comparing with 2.1 million a year ago after Q1 last year. So we driving this towards the end of concession, as you may recall, come mid-September next year. Smartphone penetration picking up, now reaching 70.2% of the devices and also 4G-enabled devices reaching 39% now -- so we will see -- and growth here still continuing and also an overall growth of the speed of take-up of those devices.

Data revenues reached THB 10.4 billion in the quarter. This represents 64% of the service revenues ex IC. You may recall that we passed 50% of data Q1 last year, so we see a very healthy growth in the data, and of course a similar challenge on voice revenues. EBITDA is up quarter-over-quarter, recording THB 6.9 billion compared with THB 6.8 billion in the last quarter, and that represents a 34.9% EBITDA margin. We do, however, have a small accounting taxes adjustment that takes down the revenue slightly, but overall absolute increase in the EBITDA quarter-over-quarter.

CapEx. We are still in a very heavy investment cycle and recorded TBH 4.5 billion CapEx in the quarter. That represents 22.7% of total revenues. But perhaps even more interesting is 28% overall of the service revenue. So still investing massively in the network. With that, a very healthy operating cash flow of THB 2.4 billion for the quarter.

And with those highlights, I like to hand over to CEO Lars to take us through the operational highlights. Lars, please.

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [3]

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Okay. Thank you, Sverre. So let's touch on to operational highlights in quarter 1. We've been running a very broad network perception campaign, where we engaged a famous presenter, (inaudible), in Thailand talking about the smooth experience on our dtac 4G network. And that campaign has been very well received by all customers in Thailand. We also launched our new brand platform, Flip It, where we flip the customer experience to be easy and worry-free, with worry-free and value for money products, smoothness of experience and a super simple service experience being a customer at dtac. We also revamped our reward program to address a broader customer base both in prepaid and postpaid and also with a higher visibility and net point of sales. I'm going to come back a little bit both on the Flip It and reward program later. We can go to the next page.

On the network side, we continue an aggressive rollout of 4G, where we have now more than doubled the number of 4G base stations in 1 year from 10,000 to 23,000 in quarter 1 '17. We also continued to expand the network or intensify the network with more towers, so we're going to be prepared for end of concession. And then we see also that the network rollout that we do had a very positive effect on the perception from our customers and especially then for data as the perception of our data network and data services have been increasing quite a bit from '15. And as also said, we also run our broad network perception campaigns, because I think the dtac customers they really perceive the improvement on the dtac network, but we also need to market this to all the customers in Thailand. Then again go to next page, talk a little bit with the brand platform. And we have launched two tools of the new brand platform. One is a new product portfolio which we call the Go No Limit. It just focuses on worry-free and good value for money and it's a portfolio both for postpaid and prepaid with unlimited data with no speed reduction and data hold-up. For to differentiate the portfolio on is instant speed. So, for example, on prepaid topping you can buy 256 kilobit per second, 500 kilobit, 1 megabit and 4 megabit, but no limit on data packets. The packages also include free calls for -- on net calls all 24 hours per day. We also have launched a new SIM for prepaid, which we call Go Plearn, and it's a basic SIM with no data leakage, it's free data, 64 kilobit per second. But of course I remind folks that this SIM is also -- it's a up-sell with the Go No Limit toppings. But I would say both the post and prepaid the Go No Limit portfolio has been very well received by our customers and the take-up rate is good as well. When it comes to reward program, we have then now increased our partners we work with with two times. So we're much more visible in all the shopping malls with our offers on -- reward offers. So that has increased definitely the visibility of the dtac brand. And we also touch more customers now both in prepaid and postpaid with the loyalty program. And at the same time, we reduced the budget we have in a more efficient way than before.

You can go to the next page, talking a little bit about postpaid and prepaid. And postpaid development continues very strong, almost 20% year-on-year in revenue improvement and of course driven by attractive offers partly within the new Go Limit portfolio -- Go No Limit portfolio, but also then in prepaid to postpaid migration. We also see a very strong positive development on number portability. So we have a very positive net porting also on postpaid. 4G subscribers continue to increase in a healthy way, 5.9 million total, and we also see the usage of 4G customers is increasing in a good way as well and especially then driven by streaming. The prepaid is still negative, of course driven by pre to post migration, a decline in voice, but also continued subsidies in the market. But we do see a stabilization. If you look quarter 1 versus quarter 4, if we look at the daily revenues for prepaid in quarter 1 versus quarter 4, it's fairly stable.

So that was a short on operational highlights. And with that, I hand over to Sverre again for the financial highlights.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [4]

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Thank you, Lars. So if you go to the Slide number 9, we now see, as mentioned, close to 96% of subscriber base registered under DTN. So we have 1 million left on dtac. And we have then recorded 195,000 net adds on positive paid and in total minus 170,000 for the full subscriber base. So the strong postpaid net adds continue and we are on track to meet the end of concession when we have to have completed all the porting. The ARPU is stable -- it's actually growing slightly overall due to the change in subscriber mix and also good postpaid performance. There is a slight decline when you add on the interconnect rate because there was a change in the regulated rate from start of the year. But the usage and the ARPU is quite healthy, developing over the quarter.

Minutes of use. We see that there is a steady decline in the voice down to 157 minutes including IC for this quarter, but the overall voice traffic in the network is growing, but it's voice over IP, which is more than replacing the decline in traditional voice. So this gets less and less meaningful actually over time. If you go to next page, you will see there strong data revenue and the usage of growth. And that results in that service revenue is actually growing now from Q4 to Q1. And you may recall, we had the special quarter in Q4 in Thailand last year due to the mourning period, so now this year we actually see an increase in service revenue quarter-over-quarter, which is kind of against the normal seasonality. In year-over-year, we also see that we are basically almost flat on daily service revenue. There is a 1.1% decline from the fact that there's 1 day left in the quarter compared to last year when we had a leap year. So that results in minus 1.3% year-over-year that impacted slight daily revenues.

Data. Accelerating growth again now and reaching 64%, close to 2/3rds of total service revenue ex IC and the revenue growth is 26.3%. And actually now the average data usage is 4.4 gigabyte per month per user. Of course this is also stimulated by the Go No Limit launch we had in mid-February. If you go to the next page, you see then there that the smartphone penetration has now reached 70% and more than 90% of the total handsets sold in the quarter are smartphones, averaging 39% 4G penetration of the devices. Handset revenues is under pressure. We see that we have lower number of units sold, and also we have a reclassification effect, which is broadly THB 230 million this quarter. And that's basically which some -- which was previously recorded as handset revenue and then we saw that sales and marketing costs are netted out. Now we consider this as effectively lower handset price, so we can treat the handset sales in all channels alike. And then overall revenue is THB 2.4 billion. So we report minus THB 958 million in handset margin for the quarter. If you compare with last quarter, you will actually see that the handset margin has improved when it comes to this reclassification effect of roughly THB 230 million.

So if you go to next slide and cost of services, we consider it well contained. Regulatory fees, we are able to control it through the migration and also through expanding the 2.1 gigahertz networks. So we drive traffic through license and we believe that we can control this well also going forward. The network OpEx also fairly well under control in spite of a substantial growth in the network, as Lars referred to previously. So cost of services stable, pretty stable over time. Also, considering that the regulatory cost declined some from this IC rate reduction I mentioned previously from the start of the year. And we are able through the operational efficiency programs to contain these costs. If you go to next page, we also considered the sales -- SG&A expenses to be under control. Again, please when you see the decline here in sales and marketing, that is the other side of this effect we mentioned previously on the handset. So the decline is not representative as presented here. You have to add back the same as you took away from the revenue on the handsets to compare the numbers. But overall, we believe that we have been able to improve the efficiency of the marketing spend, also considering the change now towards the new campaigns, as mentioned, and also the loyalty program last quarter. There is an increase in the provision for bad debt. Basically, this is driven by the strong growth in the postpaid segment and we are taking active measures to get this -- to improve this going forward. But clearly, as you dive deeper into the segment on postpaid, this is something perhaps most doubtful. General admin expenses dropped quarter-over-quarter and year-over-year and this is again the operational efficiency programs we referred to.

All in all, if you go to next page, this shows a pretty solid EBITDA development, quarter-over-quarter we are able to increase to THB 6.9 billion. It's a decline year-over-year, mainly driven by the total service revenue decline and also the handset subsidies, which was fairly high in the quarter compared to last year. But you see also the margin then is improving to 34.9%. But again, please be reminded of the handset declassification effect on this one.

So if you go to next page, you see the net profit. We are reporting roughly TBH 200 million, slightly above TBH 200 million net profit for the quarter. It -- there was an improvement from a very slim margin in the previous quarter. And we see that this is due to the improved EBITDA. And we have had also some increase in the D&A charges. Year-over-year, it's lower EBITDA and a higher depreciation that has an effect. The operating cash flow, as mentioned, it remains solid, TBH 2.4 billion if you take then EBITDA and CapEx for the quarter. And we see then that the key financial ratios remain stable with 1.1x net debt-to-EBITDA, which we believe puts us well positioned before potential spectrum acquisitions that may come in the period going forward.

With that, I would like to hand back to Lars to take us through the strategic direction and the outlook for the company.

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [5]

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Thank you, Sverre. So let's go to the key focus areas. And one is of course to continue to rollout Flip It platform and continue to rollout new Flip It tools. The first one is a Go No Limit portfolio and the reward program, but it's more to come. And then of course to continue the strong growth on postpaid, but at the same time stabilize prepaid. And like I said, we had a fairly stable development on data revenues on prepaid in quarter 1 versus quarter 4.

Overall, both the postpaid and prepaid of course continued to work on -- with the network perception campaigns and strengthening the perception of our network; have a strong value for money position especially with the Go No Limit products; to increase and expand the channels -- and of course online is a key area here; and then attract customers with personalized offers both for prepaid and postpaid. Then is network and spectrum investments and to secure our future data position. And of course one key point here is spectrum -- to secure more spectrum before end of concession and continue the 4G rollout and also intensify the networks with more towers until end of concession. And last but not least, efficient operations, where we have a strong focus now in continuing to reducing OpEx in absolute terms. We reduced the absolute OpEx in '16 versus '15 and the plan is to continue that. And one important area here is digitizing the way we drive business and especially take a strong and leading position when it comes to online sales and online service.

So going to the outlook, so it's not changed in guiding from what we reported last quarter. So service revenue same levels as previous year, EBITDA at the same level as previous year and CapEx in the range of TBH 17 billion to TBH 20 billion depending on when we get access to new spectrum. So I think that concludes short -- the update. And then we can open up for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will go to our first question in queue.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [2]

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It's Colin McCallum here from Credit Suisse. I just had a couple of questions. The first is just regarding this accounting change. So from what I hear you're kind of netting off both the revenue side and the cost side on handsets. Could you give us the marketing costs -- selling and marketing expense what it would have been in 1Q '17 had you not changed your accounting? And also, if you can tell us what the handset subsidy cost was in Q1 '17 again if you had not changed your accounting policy just so that we can clearly identify what has actually happened there? That's the first question. Secondly, the 20-odd percent increase in your depreciation charges year-on-year, I think it said previously that in last year's THB 20 billion CapEx very little of it. I think what you had said was CapEx related to the concession. But the increase in depreciation charges is obviously quite large there. So was that actually the case or were you actually forced to spend more on the concession infrastructure than you had initially thought, which is then laid through into obviously very, very short depreciation policy period or [net] depreciation. So if you can give us some color really on what's happened to drive that depreciation up so much year-on-year that would be helpful?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [3]

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On the first question, the accounting change, the effect in Q1 was THB 235 million and you find the same number both on the sales and marketing spend and on the handsets and on the revenue actually. So it's THB 235 million, is the number. You have had to add on this.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [4]

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Sorry, just to clarify there, Sverre. So just to clarify. You are saying that we would simply add THB 235 million onto the selling and marketing expenses in order to gross it up appropriately. Is that correct?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [5]

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Yes, that's correct. Add TBH 235 million on sales and marketing spend and add TBH 235 million on the handset revenue and there you go. And on the second...

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Colin McCallum, Crédit Suisse AG, Research Division - MD [6]

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Got you. And with the -- on the other hand, what about handset cost? In previous quarters you've had a handset subsidy cost, which I think, for example, previously was about THB 800 million. What was that cost in the first quarter '17 if you had not changed the accounting policy?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [7]

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The negative margin on the handsets would have then improved from minus TBH 958 million and add back TBH 235 million there and that will give you some -- yes, the adjusted. Do the math there, yes. So TBH 723 million would be the....

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Colin McCallum, Crédit Suisse AG, Research Division - MD [8]

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No, no, but that's the same number. The TBH 235 million surely can only be affecting one cost item. So I think you previously had two costs, right? You had a handset subsidy cost and in addition you had a sales and marketing cost. So I'm trying to get both numbers on a previous basis, if you're with me.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [9]

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Yes. No, it's only S&M and revenue effects where we'll see this.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [10]

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Okay. TBH 235 million then.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [11]

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We can -- let's take the (inaudible). Yes, and then your other question was on the CapEx spend last year on the concession. And we landed roughly at 20% of the CapEx, i.e., roughly THB 4 billion on the concession during 2016.

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Colin McCallum, Crédit Suisse AG, Research Division - MD [12]

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Got it. Was that a bit higher than -- I seemed to have remembered you actually talked about THB 2 billion. So was that a bit more than expected in that direction?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [13]

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No, actually I have tried to say THB 4 billion or roughly 20% all the way I believe. Maybe a misunderstanding. But it's -- we estimate at 20% and that's where we landed.

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Operator [14]

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And we will now go to our next question.

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Gopakumar Pullaikodi, Nomura Securities Co. Ltd., Research Division - Regional Head of Telecommunications Research [15]

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This is Gopa from Nomura Singapore. A few questions. Firstly, if I have to look at your top line and EBITDA, there is a lag in your guidance and one driver is the prepaid revenues, which is slowing down. What's your thoughts on this particular segment? Is there a plan to stabilize this or is the competition too much that your focus is on growing postpaid? I'm just trying to understand how would you be able to grow your overall revenues when you have prepaid on a decline? And this is question #1. Question #2 is just to follow-up on the previous question on D&A. Your D&A has increased, so are you -- just to reiterate the question, are you investing more on the concession this year or is it 20% this year as well, what's the outlook, and also how should we expect D&A in 2017 to trend? Question #3 is, I'm not sure if you can give some color, but can you talk a little bit on the TOT spectrum proposal in terms of annual fee impact. There seems to have some reports saying that it's around THB 4 billion per annum. Is that the right approximation as that number seems to be quite high when I look at your EBITDA?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [16]

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Perhaps I can take the two first on the outlook and the impact on the auction, and then Lars can take the accounting -- no, sorry, the top line considerations. We don't expect to spend much on the concession this year. It's just maintenance CapEx basically. The CapEx is invested into licensed network and into DTN apart from very, very minor elements. On the auction, we do not comment at all on any level any pricing or anything due to the stage of the process. We just have to see that unfold -- how that unfolds when we get there, so to say. And so with that, I like to hand over to Lars to answer on the prepaid and the top line considerations.

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [17]

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If you look overall in quarter 1, if you count the day effects -- there was one less day in February -- we were basically flat. So the revenue per day is about same in quarter 1 this year as last year. So that's a positive sign that we can actually reach the revenue target that we have. And as you know, we have a very good momentum of postpaid and we focus not to continue that of course. But you can also focus a lot on prepaid to stabilize that development. And if you look at the daily revenue in quarter 1 for prepaid versus quarter 4, it's tallied almost at the same level. And of course we try to stabilize postpaid revenues as much as we can over the year. But there are of course downward pressure on prepaid both on voice, but also of course as we migrate prepaid to postpaid. And then there are [specific] factors a little bit to how much handset subsidies that you see in the market from the competitors on prepaid. But most important for us on prepaid is definitely to have a strong value for money position with the Go No Limit portfolio, (inaudible). Also, work quite a lot also and expand the channels with more direct sales in online -- and I'm talking modern trade. Then we've also got very much with personalized offers to both drive ARPUs up and churn down. So we have a big program both addressing new customers in, but also addressing existing customers to make them stay as long as possible, but also of course to have a increase of ARPU as much as possible as well.

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Gopakumar Pullaikodi, Nomura Securities Co. Ltd., Research Division - Regional Head of Telecommunications Research [18]

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Just a follow-up question, sir. For 2017 should I expect the 1Q run rate in your D&A or would there be a similar increase every quarter?

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [19]

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No, I think there won't be much deviations. So it could act as kind of a benchmark for the quarters going forward.

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Operator [20]

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And we'll go to our next question.

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Unidentified Analyst, [21]

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This is [Hussein] from Citi. I just have 2 questions, first is on the competition. So in your view how is the competition trending in 2017? I believe that telecoms have launched unlimited, un-throttled data plans. So is competition shifting from handset subsidies to the pricing side? That's question #1. And just a follow -- just a question on your JV partnership with CAT, so how the discussions going on, on that side?

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [22]

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We can take -- I can take the first one. I think competition in 2017 will definitely continue to be intense. And I think we're going to see device subsidies, of course, on postpaid, but the big question is on prepaid. So for the quarter 1, we at least see one of the competitors driving quite a bit of device subsidies again on prepaid but hopefully will slow down a little bit on prepaid subsidies, but that remains to be seen of course. For us, we've been pretty clear that we will not participate in the war on prepaid handset subsidies because we don't see that business case as positive. We spend down to subsidies on postpaid where we have a very good case. But that said, we want to have a very strong value for money position both in prepaid and postpaid and that's help our Go No Limit portfolio. And then on the joint ventures talks with CAT, we can confirm that we are in continuous talks with CAT and that we are foreseeing that we may end with some joint ventures with them. However the process there will require and the solutions will require a lot of approvals from various governmental bodies and it's very hard to guess exactly how that will pan out. So for now we cannot really say anything about the final outcome and any time line to reach whatever that final outcome would be or due to the uncertainty. I will say that our relationship with CAT is very constructive. We have a mutual interest in finding a solution to this. They clearly recognize it and so do we. But the -- it's all these approvals that are required to get this done and dusted which remains, and we don't want to hand out -- be too judgmental on how exactly how that goes. We just have to follow it.

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Unidentified Analyst, [23]

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That's my first question. Regarding competition so are you seeing competition drifting to the, not just on the subsidies, but on the pricing as well, given the launch of unlimited data plans do you think that there may be some risk ARPUs as well going in 2017?

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Unidentified Company Representative, [24]

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If you look at our portfolio I think we are taking a clear position I think we have seen different case of versions of our limited plans but I think we have taken a holistic view and remember we do different shape that portfolio so I want to do it on speed but no data buckets. And for us so far we are seeing pretty good development both in postpaid and prepaid when it comes to ARPU. The topping ARPU mix for prepaid is increasing versus before and also the pack fee mix for postpaid is also increasing and the customers taking the Go No Limit portfolio.

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Operator [25]

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(Operator Instructions)

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Prem Jearajasingam, Macquarie Research - Analyst [26]

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Two questions from me, first of all with regards to the growth in your postpaid subscribers how much of this is coming from your own prepaid base versus coming from other operators? Some color around that that would be very helpful. And secondly could you comment around the 2,300 megahertz spectrum and what do you think happens on that front if a new unknown comes into the picture to take that spectrum?

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [27]

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I can take the postpaid growth. Around 50% is coming from the prepaid base, but like I said, also we see here very positive development on number portability also on postpaid. On 2,300, Sverre.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [28]

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Yes, 2,300. I am afraid we cannot say much. Of course, we read speculations in the newspaper, but as we understand it, there are 6 contestants. We're of the 3 incumbents out there and also 3 other operators that will be new comers to the mobile business. But we had to wait any formal feedback from TOT on the process to see how that goes. We again with the interest what the people says but that doesn't always reflect what the official communication is.

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Prem Jearajasingam, Macquarie Research - Analyst [29]

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Of course, of course. And by the way, this is Prem from Macquarie.

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Operator [30]

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And we will go to our next question.

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Unidentified Analyst, [31]

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This [Joe] from Deutsche Thailand. I have three question, the first one is about your depreciation charge. So in 1Q '17 it seems like your depreciation charge only increased by THB 89 million but Q-on-Q whereas in 4Q '16, 3Q '16, 2Q '16 the increase was THB 200 million to THB 400 million Q-on-Q I understand that nowadays you are spending a lot less CapEx on concession network and maybe that may have led to the slowdown in depreciation pickup rate. But I am just wondering if we should be expecting THB 89 million, THB 90 million going forward or if it should we expect depreciation to move up a bit more Q-on-Q in come second Q, third Q and going forward? Second question is about your Go No Limit package, so it seems to me like this could be a precursor to what might happen if dtac was able to get its hand on a large chunk of spectrum be the 2,300, 2,600, 1,800 et cetera so should these type of unlimited data package become the norm going forward if dtac suddenly finds itself with lot of spectrum resource essentially as a way for you to win back all the lost revenue market share in the past few years or do you see a more constructive way to taking back market without creating a disruption to the industry tariff mechanism. And my last question is about the 850 so right now you have 16,000, 2,100 sales sites and it seems like you are adding at a rate of 1,000 plus sales per quarter. So at what point would you be able to achieve the same population coverage as your current 850 network which I think you have about 13,000 sales. And then is it safe to assume that your goal is that by the time the 850 auction you would pretty much get to that level. And there you can get away with not bidding for the spectrum or is the 850 really something you said dtac still needs that anyway regardless of whether it has a backup network. Thank you.

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Sverre Pedersen, Total Access Communication Public Company Limited - CFO [32]

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Thank you. I can take the first one on depreciation, I recommend not take the exact numbers as kind of what it's going to be for the coming quarters. We take pride in having a very let's call reasonable depreciation time for the network equipment we use 78 for that. And we would like to then -- we may see -- well, if you look behind on the CapEx investments you will see that there may be a slight increase quarter-over-quarter but not any dramatic movement. But that's reflecting basically historical investments more than future investments, future investment as I said under concession is very, very limited. So for the 2 other questions, perhaps, Lars, you could cover.

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Lars-Aake Valdemar Norling, Total Access Communication Public Company Limited - CEO and Director [33]

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Yes Go No Limit important for us to have a strong value for money position and also more (inaudible) position as part of our band platform but of course we want to do thing smartly and going to differentiate on speed instead of our data buckets, data buckets are exploding this is also seen in a number of other countries, we see it in U.S., it is in Finland, it is in Switzerland and it's I think is in a lot of other European countries that look at this type of mechanism as well. And like I said when it comes to ARPU we see a positive ARPU development from the new portfolio because customers said they appreciate (inaudible) and especially on prepaid also they take more weekly amongst the package not just daily. So we have a positive operating development for toppings and we also have a positive pack fee development for postpaid. Yes the plan. It is to be plan build like never been new (inaudible) actively and the aim is to basically mimic that coverage we have 850 that 2.1. So we have the option to sustain with a high band spectrum going forward if that is necessary. Might be some affecting rules but more or less we try to mimic the coverage we have on 850 with 2.1 grid.

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Unidentified Analyst, [34]

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Okay and on the 850 on 850 with 2.1 grid.

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Unidentified Analyst, [35]

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And on the 850, I mean, let's say that you are able to, to have a backup network that can takeover, if you don't get the 850, but you see value in the spectrum in a sense of IoT or M2M or is that just something that's not that important (inaudible)?

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Unidentified Company Representative, [36]

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Yeah, but of course, the 850 low bound spectrum is almost valuable for different use cases, but we just want to be in a situation where we can choose in a better way and let's say amount of auction how it be auctioned and when it will auctioned and how much auction and of course the reserve price is going to be.

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Unidentified Analyst, [37]

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Okay. And actually so just going back to the Go No Limit package, I don't think I quite caught you properly, so you -- so when you said that you still value in top ups and therefore you don't plan to make everything unlimited, is that what you're saying that you still need some of these --

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Unidentified Company Representative, [38]

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Yeah (inaudible).

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Unidentified Analyst, [39]

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that package with top ups?

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Unidentified Company Representative, [40]

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Yeah, we -- if we different checks fill the packs both the postpaid and prepaid, but we do on it on [still]. On the topping for prepaid we have 250 kilobytes pack, 500 kilobyte pack and 1 [meg] pack and 4 meg pack. And we see quite a good set between those packs and especially we see it more on more, but not from daily packs to weekly and monthly packs and that's on prepaid. Postpaid we have the same so we start up 1 megabit direct up to 4 (inaudible) max speed, but also very pretty good mix upwards in the packet that a customer chooses. So we do differentiate there is not just one pack of prepaid and one pack of postpaid we have to cut (inaudible) but on speed and not on data market.

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Operator [41]

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And we have another question.

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Unidentified Analyst, [42]

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My question has actually been answered. Thank you very much.

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Operator [43]

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(Operator Instructions) And we'll to our next question.

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Unidentified Analyst, [44]

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Actually, my question also already been answered. Thank you for the opportunity to ask.

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Operator [45]

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And at the time we have no more questions in queue.

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Unidentified Company Representative, [46]

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Okay. With that, thank you all for your time and interest. And of course, with more detailed follow-up questions, please contact our magnificent IR department so they will assist you. And also, we are happy, of course, to have a continuous dialogue as we go forward. So again, thank you all, and let see how this pans out.

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Unidentified Company Representative, [47]

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Thank you.

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Operator [48]

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That does conclude today's conference. We thank you for your participation.