On the heels of a solid operational performance with earlier than expected achievement of synergies in 2023, True Corporation has laid out its roadmap towards becoming a telco-tech leader, aiming for sustainable profitability and value creation with aggressive growth by expanding digital portfolio and synergies across the organization by 2025.
True Corporation’s Co-Chief Financial Officer Nakul Sehgal, said: “Our solid performance in Q4’23 marked by overachievement of synergies for the first 10 months of operations of the newly amalgamated True Corp, gives us confidence that we’re on the right path.”
At a press conference held on February 23, 2024 at True Tower, he gave a deep dive on key numbers as follows:
- Service revenue excluding IC had a sequential growth over the last three quarters, driven by increase in ARPU and higher subscribers, especially from the tourist and migrant segments
- EBITDA growth was seen for 4 consecutive quarters, as a result of synergy realization, topline growth, and efficiency initiatives.
- Organization modernization is on track with 135% achievement against organization efficiency targets, while employee engagement improved by 4 percentage points.
- True has been ranked the No. 1 in the world as the most sustainable company for the 6th consecutive year as assessed by Dow Jones Sustainability Index (DJSI) 2023.
- Synergy realization exceeded expectation amounting to 12.9 billion baht in gross synergies, with net synergies 700 million baht higher than projection due to accelerated execution of organization and network modernization.
True Corp has been driving more than 100 initiatives within the company towards the realization of synergies, with the top 15 initiatives delivering 85% of the synergy values.
Additionally, while True Corp leveraged on the unmatched retail reach across segments thanks to CP Group, the benefit from global procurement provided by Telenor Group has helped it deliver much higher synergies on the CAPEX.
“2023 was the year of integration and restructuring. 2024 is going to be a year to transform for profitable growth. And 2025 will be the year for sustainable profitability and value creation for the customer, the industry, the markets and the country,” said Nakul.
Road to Profitability
To achieve profitability in 2024 on a normalized basis, there are three key areas of focus, namely experience, growth and synergies.
Our network modernization and Artificial Intelligence (AI) deployment is enabling us to deliver even greater experiences to our customers with targeted and precise investments leading to Capex efficiency. Our superior 5G network with our rich spectrum portfolio will result in two-fold 5G top speed and widest coverage (99% in Bangkok and Eastern Economic Corridor, 90% nationwide). Rapid personalized support in physical channels and simpler journey across digital touchpoints are also our key focus.
True Corporation has set-aside a CAPEX of 30 billion for 2024 which includes network modernization covering 10,000 sites by this year-end, up 8,000 from last year. This also covers investments in automating back-end systems to drive digitalization across the organization, enabling True to become a Tech-Telco company.
Out of 55,000 network towers, 17,000 will be modernized with a gradual upgrade plan towards completion in 2025.
“The more we modernize, the better will be the experience of the customers,” he reiterated.
Telecom-Tech Opportunities
True is aiming to capture the opportunities in tech-telecom space, starting from 5G monetization and uplift based on the projection of additional 16 million users. Further, another four million customers of fixed broadband together with 40+ million monthly active users (MAUs) using digital services will be nurtured. Revenue from beyond core B2B services is expected to double over next few years.
“We want to be a digital growth champion in the country. From mobile to “lifestyle”, broadband to “smart living” and cable TV to “streaming”. That’s the mantra that we want to follow in 2024,” Nakul explained, adding that “Mobile is not about the connectivity services alone. It’s about empowering the digital lifestyle of customers, including content on True ID, TrueVisions Now, True X, Gaming Nation and so on. Smart living is all about connected devices and services that customer can experience considering today’s digitization needs.”
He said that broadband is a space where the market is heating up from the recent consolidation. Innovation in product development and service offering with AI powered proactive maintenance and automation, will help provide unmatched experiences from True Corporation. There is still under penetration in this market with a potential to connect the unconnected through attractive propositions. True expects to get a fair share of this opportunity, while ARPU continues to recover slowly but surely.
“Mobile, online and digital businesses will continue to fuel growth this year,” said Nakul.
Brighter Outlook
In 2024, service revenue is predicted to grow by 3-4% in line with Thailand’s GDP forecast in addition to ARPU improvement and higher contribution from B2B. With commitment to profitable growth, 9-11% growth in EBITDA is expected, fueled by continued cost discipline in operations and synergy realization. Thanks to the better-than-expected financial and operational guidance, True expects to deliver gross synergies of 20 to 25 billion baht in 2024.
In relation to our ability to meet the financial obligations, the leverage ratio (net debt-to-EBITDA) target of below 4.5 levels is likely to be seen earlier than 2025 as a consequence of improved operational performance resulting in a brighter outlook on EBITDA.
Asked about refinancing plan, he explained that True’s primary source of refinancing will be the Thai Baht bonds. We have refinancing needs to the extent of roughly 74 billion baht in 2024. Bond market in Thailand has great demand for companies with a good credit which has been seen in the past as well where approx. 1.2 trillion baht were raised in 2022 and another 1 trillion in 2023 majority of which was offered by companies with a credit of A+ and above.
The improved credit ratings of True to A+ from BBB+ (for ex True) should help in bringing the interest burden down. As a result, even with the rising interest rates, the overall effective cost of bonds will be similar or slightly lower. For the 10.5 billion raised in January 2024, the effective cost was around 3.9%.
“We’ve received a fantastic response from the bond market. True raised bonds worth 10.5 billion from investors, above from initial target of 7 billion. Our successful debenture offering underscores investors’ confidence in the company, despite global economic uncertainties and investor apprehensions in Thai corporate debenture market and gives us a lot of confidence as we continue to look at tapping the bond market in future as well,” he said.
