MD&A Executive Summary Solid Results with Strong Net Additional Subscribers dtac 2012 results were strong both financially and operationally. Our total revenues grew healthily to THB 89.5 billion, increasing 13.0% YoY. Full-year net additional subscribers of 2.1 million drove our subscriber base to reach 25.3 million at the end of 2012. Value Added Service (VAS), especially mobile Internet, and handset sales were key contributors to our total revenue growth in 2012. These were mainly driven by the growing popularity of smartphones and social network applications. Our 2012 EBITDA stood at THB 26.8 billion, decreased by 1.8% YoY, mainly because of the increase in revenue sharing rate from 25% to 30% and low-margin contribution from the handset business. Consequently, net profit declined 4.5% YoY as a result of lower EBITDA, higher network amortization and higher interest expenses. Continuing our focus on Customer Centricity strategy, dtac has invested in all aspects of our operations to ensure the Operation Summary Subscribers Surpassed 25M delivery of differentiated and superior customer experience across all touch points. In 2012, we successfully completed the nationwide 2G network modernization (swap) and the 3G 850MHz network expansion, now with the 3G services covering approximately 60 % population coverage in major cities nationwide. In October 2012, DTAC Network Co., Ltd. (DTN), a whollyowned subsidiary of dtac, won the International Mobile Telecommunications (IMT) license auction for 2.1GHz frequency from the National Broadcasting and Telecommunications Commission (NBTC) and subsequently received the license in December 2012. The new 3G 2.1GHz license will not only create a level playing field in Thai telecommunications industry but will also create a robust growth in the mobile broadband market in Thailand. Our 3G 2.1GHz service is expected to be launched in the second quarter of 2013. In Q412, dtac had record-high net additional subscribers of 1.5 million, grew significantly from the previous quarter as a result of effective acquisition and retention campaigns for Prepaid and smartphone popularity for Postpaid together with our special internal campaigns to boost the net additional subscribers. By the end of 2012, total subscriber base rose to 25.3 million, with total net additional subscribers of 2.1 million. Prepaid subscriber base for the full year grew by 1,674,706 and for Postpaid by 416,581. Postpaid 2,399 2,586 2,816 Prepaid 20,817 21,271 22,492 Total 23,217 23,858 25,308 Table 1: Total active subscribers (in thousand) Postpaid 40 84 230 Prepaid 311 173 1,220 Total 352 257 1,450 Table 2: Net additional subscribers (in thousand) %QoQ 2011 2012 Postpaid 519 492 484-1.5% -6.7% 501 491-2.0% Prepaid 257 257 261 1.4% 1.3% 270 255-5.5% Blended 283 281 284 1.1% 0.3% 293 279-4.7% Postpaid w/o IC 386 371 366-1.5% -5.2% 372 369-0.7% Prepaid w/o IC 209 214 218 2.2% 4.3% 222 211-5.1% Blended w/o IC 227 230 234 1.7% 3.1% 237 227-4.2% Table 3: MOU (minutes/sub/month) INVESTOR RELATIONS 1
%QoQ 2011 2012 Postpaid 713 710 727 2.4% 1.9% 692 715 3.2% Prepaid 220 217 217 0.2% -1.2% 218 219 0.1% Blended 269 268 271 1.2% 0.8% 266 270 1.5% Postpaid w/o IC 580 589 607 3.1% 4.7% 565 592 4.8% Prepaid w/o IC 173 174 174 0.3% 1.0% 172 175 1.5% Blended w/o IC 214 217 221 1.5% 3.3% 212 218 3.0% Table 4: ARPU (THB/sub/month) Improved ARPU driven by higher data consumption 2012 blended ARPU improved 1.5% from 2011 mainly from higher data consumption supported by our 3G 850MHz network expansion. Q412 blended ARPU improved 1.2% QoQ and 0.8% YoY from festive seasons and higher data usages. Q412 MOU slightly increased 1.1% QoQ due to seasonality and 0.3% YoY due to special campaigns to stimulate usage. However, MOU for the year 2012 decreased by 4.7% from the previous year from changing customer lifestyle towards more data usage. Financial Summary Healthy Financial Performance Continued despite Pressure from Revenue Share %QoQ 2011 2012 Service revenues ex. IC 14,953 15,786 16,693 5.7% 11.6% 58,577 63,502 8.4% Interconnection revenue 3,834 3,602 3,742 3.9% -2.4% 14,611 14,732 0.8% Handsets and starter kits sales 1,442 1,722 3,690 114.3% 155.9% 5,747 10,998 91.4% Other operating income 31 67 60-10.6% 92.8% 264 265 0.3% Total revenues 20,259 21,177 24,185 14.2% 19.4% 79,199 89,497 13.0% Regulatory fees (4,840) (5,214) (5,384) 3.3% 11.2% (16,705) (20,644) 23.6% Cost of services (1,898) (2,035) (2,432) 19.5% 28.2% (7,014) (8,177) 16.6% Interconnection cost (3,572) (3,417) (3,493) 2.2% -2.2% (13,531) (13,919) 2.9% Cost of handset and starter kits (1,354) (1,658) (3,530) 112.9% 160.6% (5,137) (10,430) 103.0% Total operating cost (11,663) (12,323) (14,838) 20.4% 27.2% (42,387) (53,169) 25.4% Gross profit 8,596 8,853 9,347 5.6% 8.7% 36,812 36,329-1.3% SG&A (2,533) (2,224) (2,754) 23.9% 8.7% (9,669) (9,785) 1.2% Other income 51 21 164 689.8% 220.6% 154 266 72.6% EBITDA 6,114 6,651 6,757 1.6% 10.5% 27,296 26,809-1.8% Depreciation and amortization (2,659) (2,821) (3,166) 12.2% 19.1% (10,479) (11,389) 8.7% Interest income 218 105 108 2.3% -50.6% 579 385-33.5% Gain/Loss on foreign exchange 2 85 24-72.0% 946.7% 113 113-0.2% EBIT 3,676 4,019 3,722-7.4% 1.3% 17,509 15,918-9.1% Financial cost (74) (242) (327) 34.9% 339.2% (431) (1,119) 159.6% Income tax (1,221) (896) (824) -8.1% -32.6% (5,266) (3,524) -33.1% Net profit for the period 2,380 2,881 2,571-10.8% 8.0% 11,812 11,276-4.5% Table 5: Income statement (THB million) Operating Revenues Revenue Growth Driven by VAS Total operating revenues for 2012 amounted to THB 78.2 billion, growing 6.9% from the previous year and Q412 operating revenues increased 5.4% QoQ and 8.8% YoY. Such a strong growth was primarily driven by VAS revenues on the back of growing popularity of smartphones and social network applications and expanded 3G 850MHz network. INVESTOR RELATIONS 2
Operating revenues consist of: 2011 2012 %QoQ Amt % Amt % Amt % Amt % Amt % Voice 11,192 59.6% 10,625 54.8% 10,882 53.3% 2.4% -2.8% 44,099 60.3% 43,347 55.4% -1.7% Postpaid 2,788 14.8% 2,702 13.9% 2,810 13.8% 4.0% 0.8% 11,062 15.1% 10,865 13.9% -1.8% Prepaid 8,404 44.7% 7,923 40.9% 8,072 39.5% 1.9% -4.0% 33,036 45.1% 32,481 41.5% -1.7% VAS 2,891 15.4% 3,835 19.8% 4,431 21.7% 15.5% 53.3% 10,169 13.9% 15,175 19.4% 49.2% IR 448 2.4% 589 3.0% 648 3.2% 10.1% 44.7% 2,106 2.9% 2,285 2.9% 8.5% Others 422 2.2% 737 3.8% 732 3.6% -0.6% 73.4% 2,203 3.0% 2,696 3.4% 22.4% Service revenues ex. IC 14,953 79.6% 15,786 81.4% 16,693 81.7% 5.7% 11.6% 58,577 80.0% 63,502 81.2% 8.4% IC 3,834 20.4% 3,602 18.6% 3,742 18.3% 3.9% -2.4% 14,611 20.0% 14,732 18.8% 0.8% Service revenues 18,786 100.0% 19,388 100.0% 20,435 100.0% 5.4% 8.8% 73,188 100.0% 78,235 100.0% 6.9% Table 6: Breakdown of service revenues (THB million) 1) Revenue from Voice Service in 2012 slightly declined 1.7% to THB 43.3 billion. For Q412, voice revenue increased 2.4% QoQ due to festive usage and our marketing campaigns. Revenue from voice service in 2012 accounted for 55.4% of total service revenues, decreasing from 60.3% in 2011 due to strongly growing VAS revenue. 2) Revenue from Value-Added Services (VAS) had the strongest growth of 49.2% from 2011, mainly driven by mobile Internet usage on the back of our 3G 850MHz coverage expansion and higher smartphone penetration among our subscriber base. VAS revenue in Q412 grew 15.5% QoQ and 53.3% YoY from the same reasons. For 2012, revenue from VAS represented 19.4% of service revenues, increasing from 13.9% in 2011. 3) Revenue from International Roaming Service (IR) in 2012 improved 8.5% from 2011 as a result of growth from inbound revenue. For Q412, IR revenue also increased 10.1% QoQ and 44.7% YoY. IR revenue in 2012 was 2.9% to service revenues, same as that in 2011. 4) Interconnection (IC) Revenue for the year 2012 slightly increased 0.8% from 2011. Q412 IC revenue increased 3.9% QoQ but decreased 2.4% YoY. 5) Other Service Revenues, comprising mainly of revenues from IDD services and other fees, in 2012 increased 22.4%. For Q412, they decreased 0.6% QoQ but increased 73.4% YoY. Revenue from Sales of Handsets and Starter Kits for the year 2012 rose significantly 91.4% from last year as a result of iphone 4S earlier in the year and iphone 5 in Q412. Q412 sales also increased 114.3% QoQ and 155.9% YoY. Operating Cost Revenue Sharing and Network OPEX as Major Cost Pressure Operating Costs of Services were pressured by full-year impact of increased revenue sharing and higher network OPEX. The costs increased 14.7% from 2011 to THB 42.7 billion. Operating costs of services consist of: 1) Regulatory Costs, comprising revenue share to CAT and numbering fee to the NBTC, in 2012 increased 23.6% in line with service revenue growth and the increase in revenue sharing rate. For Q412, regulatory costs increased 3.3% QoQ and 11.2% YoY due to higher service revenues. 2) Network OPEX increased by 23.1% from 2011 due to our aggressive 2G network modernization and 3G 850MHz network expansion. For Q412, network OPEX increased 13.1% QoQ and 28.7% YoY. 3) Interconnection (IC) Cost for 2012 increased 2.9% from last year and Q412 IC cost increased 2.2% QoQ but decreased 2.2% YoY. For the year 2012, dtac had net IC balance at THB 813.6 million, decreasing from that of THB 1.1 billion in 2011. 4) Other Operating Cost of Services, consisting of prepaid card production costs and commissions, IR and IDD costs, network insurance costs and others, increased 11.2% from 2011. Cost of Handsets and Starter Kits for 2012 increased 103.0% from last year in line with the corresponding revenue but at %QoQ 2011 2012 %Yoy Regulatory 4,840 5,214 5,384 3.3% 11.2% 16,705 20,644 23.6% Network 865 984 1,113 13.1% 28.7% 3,149 3,877 23.1% IC 3,572 3,417 3,493 2.2% -2.2% 13,531 13,919 2.9% Others 1,033 1,051 1,319 25.4% 27.7% 3,866 4,300 11.2% Operating cost of service 10,309 10,665 11,309 6.0% 9.7% 37,251 42,739 14.7% Table 7: Breakdown of operating cost of services (THB million) INVESTOR RELATIONS 3
%QoQ 2011 2012 Selling & marketing expenses 706 521 783 50.4% 11.0% 2,802 2,713-3.2% General administrative expenses 1,812 1,649 1,891 14.7% 4.3% 6,701 6,844 2.1% Provision for bad debt 14 54 80 49.0% 452.9% 166 228 37.6% SG&A expenses 2,533 2,224 2,754 23.9% 8.7% 9,669 9,785 1.2% Table 8: Breakdown of SG&A (THB million) a larger extent due to lower handset margin. For Q412, this cost increased 112.3% QoQ and 160.6% YoY. Selling, General and Administrative Expenses (SG&A) More Efficient SG&A SG&A slightly increased by 1.2% from 2011 but improved as a percentage to service revenues from 13.2% in 2011 to 12.5% in 2012. In Q412, SG&A increased 23.9% QoQ and 8.7% YoY mainly from higher selling and marketing, and general administrative expenses. SG&A comprises: 1) Selling and Marketing Expenses for the year 2012 decreased 3.2% YoY but for Q412, increased 50.4% QoQ and 11.0% YoY due to postponed marketing activities from Q312. The proportion of selling and marketing expenses to service revenues in 2012 stood at 3.5%, improving from that of 3.8% in 2011. 2) General Administrative Expenses for 2012 increased at 2.1% from 2011 mainly from special bonus to employees as a result of internal subscriber acquisition campaign. For Q412, general administrative expenses increased 14.7% QoQ and 4.3% YoY. The proportion to service revenues for 2012 stood at 9.0%, improving from 9.4% in 2011. 3) Provision for Bad Debt for 2012 increased 37.6% and, for Q412, it rose 49.0% QoQ and 452.9% YoY due to low base effect in 2011 from provision reversal. Provision for bad debt for 2012 remained at a comfortable level at 1.3% of postpaid revenue. Depreciation and Amortization (D&A) Increased D&A from Additional CAPEX 1) Amortization of Deferred Rights for 2012 increased 10.0% from 2011 from 2G network modernization and 3G 850MHz network expansion in addition to the shorter amortization period. For Q412, this increased 17.0% QoQ and 24.0% YoY. 2) Depreciation and Amortization of SG&A for 2012 increased 2.7% from 2011 due to our investment in IT system, and sales and distribution channels. However, for Q412, this decreased 8.1% QoQ and 2.0% YoY. EBITDA and Net Profit Softer EBITDA Margin from Increased Revenue Sharing and Low-Margin Handset Business EBITDA in 2012 was THB 26.8 billion, decreasing by 1.8% YoY and EBITDA margin also decreased to 29.9% from 34.4% in 2011 as a result of increased revenue sharing, higher network OPEX and low-margin handset business. However, for Q412, EBITDA increased 1.6% QoQ and 10.5% YoY while Q412 EBITDA margin stood at 27.7%, decreased from 31.4% in Q312 and 30.1% in Q411, mainly from lower margin of handsets. Net profit for the year 2012 amounted to THB 11.3 billion, decreasing 4.5% from 2011 due to lower EBITDA, higher network amortization and interest expenses. For Q412, net profit declined 10.8% QoQ but increased 8.0% YoY. Balance Sheet and Key Financial Information Healthy Financial Position Total Assets at the end of 2012 stood at THB 101.0 billion, slightly decreasing from that of THB 103.8 billion at the end of 2011 mainly from the decrease in cash and cash equivalent as a result of special dividend paid earlier in the year and a change in dividend payout policy. Interest-Bearing Debt at the end of 2012 was THB 26.3 billion, significantly increasing from that of THB 4.6 billion at the end of 2011 as a result of our financial restructuring and increase in loan facilities for 3G 2.1GHz related investments. Operating Cash Flow (defined as EBITDA - CAPEX) for 2012 was THB 17.5 billion, decreasing from that of THB 21.5 billion in 2011 due to higher CAPEX in order to achieve the entire network modernization and 3G 850MHz network expansion. %QoQ 2011 2012 Amortization of deferred right 2,159 2,288 2,676 17.0% 24.0% 8,540 9,396 10.0% Depreciation and amortization SG&A 500 533 490-8.1% -2.0% 1,940 1,993 2.7% D&A expenses 2,659 2,821 3,166 12.2% 19.1% 10,479 11,389 8.7% Table 9: Depreciation and amortization expenses (THB million) INVESTOR RELATIONS 4
Outlook 2013 2013 Full-Year Guidance In 2012, dtac completed the year with the entire network modernization and 3G 850MHz network expansion and yet delivered strong results in our revenue growth, especially in VAS, and high net additional subscribers, resulting in the ending subscriber base of 25.3 million. In 2013, we will continue to focus on our Customer Centricity initiatives to maximize our customers satisfaction and experience. To cater for greater data demand, we will continue to build the best network as fast as we can and plan to offer our customers with the new 3G 2.1GHz network in the second quarter of 2013. 2011 2012 Cash and cash equivalent 21,873 4,555 Other current assets 9,252 12,415 Non-current assets 72,722 84,049 Total assets 103,847 101,018 Current liabilities 64,850 37,800 Non-current liabilities 4,109 28,274 Total liabilities 68,959 66,074 Shareholders equity 34,888 34,944 Total liabilities and shareholders equity 103,846 101,018 Table 10: Balance sheet (THB million) Our guidance for 2013, we expect our revenue growth at the high single digit which will be mainly driven by increasing mobile Internet service. EBITDA margin will be in the range of 30.0% to 31.0% while CAPEX for 2013 will be at the minimum of THB 8.0 billion. We would like to point out that 2013 results will be affected by: 1) Reduction in corporate income tax rate from 23% to 20%; and 2) Customer migration to licensing. CONTACT US: TOTAL ACCESS COMMUNICATION PLC. Investor Relations 319 Chamchuri Square, Phayathai Road, Pathumwan, Bangkok 10330 Tel: (66) 2202 8882 E-mail: IR@dtac.co.th www.dtac.co.th Chatsuda Santanond Kaewridthara Viriyawathana INVESTOR RELATIONS 5