Present to. True Corporation Public Company Limited

Transcription

1 (Translation version) The Opinion of Independent Financial Advisor regarding the Acquisition of Assets of True Move H Universal Communication Co., Ltd Present to True Corporation Public Company Limited by Wealthiest Advisory Co., Ltd 7 March 2016

2 NBTC NTC OFNB The Company or TRUE TUC Independent Financial Advisor or IFA BTFP SET AIS DTAC JAS TOT CAT LG HSPA 3G 4G LTE DIF ARPU CAGR IC EBITDA FCFF MLR MVNO NPV IRR WACC Glossary The National Broadcasting and Telecommunications Commission The National Telecommunications Commission Office of the National Broadcasting and Telecommunication (Now is NBTC) True Corporation Public Company Limited True Move H Universal Communication Company Limited Wealthiest Advisory Co., Ltd Broadcasting and Telecommunications Research and Development Fund for the Public Interest The Stock Exchange of Thailand Advanced Info Service Public Company Limited Total Access Communication Public Company Limited Jasmine International Public Company Limited TOT Public Company Limited CAT Telecom Public Company Limited Letter of Guarantee High Speed Packet Access Third Generation of Mobile Telephone Fourth Generation of Mobile Telephone Long-Term Evolution Digital Telecommunications Infrastructure Fund Average Revenue per User Compound Annual Growth Rate Interconnection Charge Earnings Before Interest Tax Depreciation and Amortization Free Cash Flow to Firm Minimum Loan Rate Mobile Virtual Network Operator Net Present Value Internal Rate of Return Weighted Average Cost of Capital Wealthiest Advisory Co., Ltd

3 Table of Contents Executive Summary... 3 Part 1. The General Characteristics of the Transaction... 6 Part 2. Details of the Company and TUC Part 3. Appropriateness and Advantages of the Transaction The Objective of the Transaction The Advantages of Entering into the Transaction Disadvantages and Risk of Entering into the Transaction Other Options in case of not Entering into the Transaction Part 4. The Reasonableness of the Price Comparison Approach using Prices Paid in the Same Spectrum Actions Abroad The Feasibility Analysis of Mobile Phone Service Business after Obtaining the 1800MHz and 900MHz Spectrum License compared to the case that the Company does not obtain the1800 MHz and 900 MHz Spectrum License The feasibility analysis of mobile phone service business after obtain 1800 MHz and 900 MHz The Feasibility Analysis of Mobile Phone Service Business in case that the Company does not obtain the 1800 MHz and 900 MHz Spectrum License Part 5. Conclusion of the IFA s opinion Enclosure 1 Sensitivity Analysis in each case Enclosure 2 10-Year Inflation Rate ( ) Wealthiest Advisory Co., Ltd

4 7 March 2016 Subject: The Opinion of Independent Financial Advisor regarding the Acquisition of Assets from a Winning Bidder in the Auction of the 1800 MHz and 900 MHz for International Mobile Telecommunications (IMT) Spectrum License To: Independent Directors, Audit Committee, and Shareholder of True Corporation Public Company Limited According to the Board of Directors Meeting No. 4/2015 of True Corporation Public Company Limited ( the Company or True ) held on 11 September 2015 has passed the resolution to authorize True Move H Universal Communication Company Limited ( TUC ), a 99.99% subsidiary of the Company, to participate in the auction process of Spectrum Licensing for International Mobile Telecommunications ( IMT ) ( Spectrum License ) of 1800 MHz for spectrum bandwidth covering 15 MHz and 900 MHz for spectrum bandwidth covering 10 MHz from NBTC. TUC submitted the application to participate auction for Spectrum Licensing of 1800 MHz and 900 MHz, the meeting was held on 11 September 2015 and 15 December 2015 respectively. The total bid price for this auction is 116,090 million baht (VAT excluded), which consists of 39,792 million baht (VAT excluded) for 1800 MHz Spectrum License and 76,298 million baht (VAT excluded) for 900 MHz Spectrum License which the Company has disclosed in the Information Memorandum regarding Acquisition of aforesaid assets to SET on 14 December 2015 and 1 February Moreover, there is the investment plan for procuring telecommunication networks about 51,600 million baht. However, the aforementioned transaction has the total value of 167,690 million baht which is regarded as an acquisition of assets according to the Notification of the Capital Market Supervisory Board No. Tor Chor. 20/2551Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets, and the Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposal of Assets B.E. 2547, as amended. In this regard, the transaction value is 59.29% of the total assets of the Company and its subsidiaries as at 31 December , as the total value of the consideration is classified as type-1 transaction which the value of transaction is equal or above 50% but less than 100%. Therefore, the Company is required to disclose the information memorandum regarding the Transaction to the Stock Exchange of Thailand ( SET ), and appoint an independent financial advisor to provide the opinion to shareholders, and hold the shareholder meeting to consider and approve the Transaction. The Transaction must be approved by a resolution of no less than three-fourth (3/4) of the total number of votes of the shareholders who have the rights to vote or proxy (if any) who attend the meeting and entitled to vote. However, in order to entering into the aforesaid Transaction, the Company could not ask for the approval from shareholders before entering into the Transaction since the disclosure of amount of money for the auction or relating information such as investment budget, guidelines for operating mobile phone network expansion plans, and sources of funds in advance because it may undermine the company to participate in the auction. During the time of the auction, there are uncertainty that how many spectrum Wealthiest Advisory Co., Ltd Page 1

5 licenses which TUC could win and how much value of the auction. Moreover, in case that TUC is a winning bidder in the auction of spectrum license and investing in mobile phone network, the value of transaction may not be important enough to meet the criteria which require shareholders approval according to the notification of Acquisition or Disposal of Assets. Therefore, the Company needs to take an action before receiving approval of the Transaction from shareholders. To be legally binding, the Company shall acquire the right to use spectrum license and investment in relating matters, the Board of Directors Meeting No. 1/2016 held on 29 January 2016 has resolved to recommend the Annual General Meeting of the Shareholders, which contains of the agenda To ratify the entering into the material transaction of acquisition of aforesaid assets in Agenda 8 (The more details has shown in the invitation letter for Annual General Shareholders Meeting 2016 which is attached with this IFA Report). The Company has appointed Wealthiest Advisory Co., Ltd ( Independent Financial Advisor or IFA ) to be an independent financial advisor to provide the opinion to shareholders on the appropriateness of the Transaction and the reasonable of prices and terms of the Transaction to shareholders. In preparing this report, IFA relied on the information and details from Information Memorandum which the Company submitted to SET and other information received from the Company such as the audited financial statements of the Company and TUC which have been prepared and certified by a Certified Public Accountant, the performance of mobile business during , the projections and business practices of mobile phones, and other relevant information. Moreover, there are also the public information such as mobile phone service industry, economic situation, other information relating to the consideration of entering into the transaction together with the management interview. However, the analysis and opinion of IFA is under the assumption that all information received from the Company as well as the management interview are complete and accurate. In this case, IFA does not verify the accuracy and completeness of all disclosure information therefore IFA cannot certify or guarantee or liability, either directly or indirectly related to the accuracy or completeness of the information and certifications that he Company provide to IFA. IFA is not responsible for any profits or losses and various impacts resulting from this transaction. The sole purpose of this report is to provide opinion to independent director, audit committee, and the Company s shareholders regarding fairness of price and appropriateness of entering into the transaction based on the current information. Therefore, the opinion of IFA could not verify the impact of any changes or any event subsequent to the transaction which could significantly impact the business operations and financial projections which has been prepared for consideration of the reasonableness of the acquisition of assets as mentioned above. Wealthiest Advisory Co., Ltd Page 2

6 Executive Summary According to the Board of Directors Meeting No. 4/2015 of True Corporation Public Company Limited ( the Company or True ) held on 11 September 2015 has passed the resolution to authorize True Move H Universal Communication Company Limited ( TUC ), a 99.99% subsidiary of the Company, to participate in the auction process of Spectrum Licensing for International Mobile Telecommunications ( IMT ) ( Spectrum License ) of 1800 MHz for spectrum bandwidth covering 15 MHz and 900 MHz for spectrum bandwidth covering 10 MHz from NBTC. TUC submitted the application to participate auction for Spectrum Licensing of 1800 MHz and 900 MHz, the meeting was held on 11 September 2015 and 15 December 2015 respectively. The total bid price for this auction is 116,090 million baht (VAT excluded), which consists of 39,792 million baht (VAT excluded) for 1800 MHz and 76,298 million baht (VAT excluded) for 900 MHz which has disclosed in the Information Memorandum regarding Acquisition of aforesaid assets to SET on 14 December 2015 and 1 February Moreover, there is the investment plan for procuring telecommunication networks about 51,600 million baht However, the aforementioned transaction has total value of 167,690 million baht which is regarded as an acquisition of assets according to the Notification of the Capital Market Supervisory Board No. Tor Chor. 20/2551Re: Rules on Entering into Material Transactions Deemed as Acquisition or Disposal of Assets, and the Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Acquisition and Disposal of Assets B.E. 2547, as amended. In this regard, the transaction value is 59.29% of the total assets of the Company and its subsidiaries as at December 31, 2015, as the total value of the consideration is classified as type-1 transaction which the value of transaction is equal or above 50% but less than 100%. Therefore, the Company is required to disclose the information memorandum regarding the Transaction to the Stock Exchange of Thailand ( SET ), appoint an independent financial advisor to provide the opinion to shareholders, and hold the shareholder meeting to consider and approve the Transaction. The Transaction must be approved by a resolution of no less than three-fourth (3/4) of the total number of votes of the shareholders who have the rights to vote or proxy (if any) who attend the meeting and entitled to vote. However, in order to entering into the aforesaid Transaction, the Company could not ask for the approval from shareholders prior to entering into the Transaction since the disclosure of amount of money for the auction or relating information such as investment budget, guidelines for operating mobile phone network expansion plans, and sources of funds in advance because it may undermine the company to participate in the auction. During the time of the auction, there are the uncertainty that how many spectrum licenses TUC could win and how much value of the license. Moreover, in case that TUC is a winning bidder in the auction of spectrum license and investing in mobile phone network, the value of transaction may not be significant enough to meet the criteria which require shareholders approval according to the notification of Acquisition or Disposal of Assets. Therefore, the Company needs to take an action before getting approval of the Transaction from shareholders. To be legally binding, the Company shall acquire the right to use spectrum license and investment in relating matters, the Board of Directors Meeting No. 1/2016 held on 29 January Wealthiest Advisory Co., Ltd Page 3

7 2016 has resolved to recommend the Annual General Meeting of the Shareholders, which contains of the agenda to ratify the entering into the material transaction of acquisition of aforesaid assets in Agenda 8 (The more details has shown in the invitation letter for Annual General Shareholders Meeting 2016 which is attached with this IFA Report). Wealthiest Advisory Co., Ltd is IFA, providing opinion to shareholder on the reasonableness, fairness of price and conditions of the acquisition of such assets. IFA has considered the reasonableness of the transaction to acquire the assets and has seen that the acquisition of the Spectrum License of 1800 MHz and 900 MHz through an auction organized by the NBTC, which is a government agency, as well as the investment plan for procuring telecommunication networks has reasons and justifications below: (1) The revenue structure of the mobile services industry is changing from revenue from voice services (Voice) to a non-voice (Non-voice), which demand for the Bandwidth to support for use of Non-voice in future. (2) Operating results from the Company's mobile services are significant part and becomes a larger proportion of the Company s revenue as the mobile business has high growth especially the data services, which is required the stability of the resources in order to accommodate the future growth. In this event, the acquisition of the assets of TUC, which is a subsidiary of the Company has advantages as follows: (1) Increase competitiveness of the company as the Company will have the largest proportion of bandwidth per subscriber in the industry which would help to improve infrastructure, quality of service and the coverage of the mobile network of the Company. (2) Support the growth in mobile phone service business of the Company especially revenue from non-voice service which has rapidly growth in revenue from the popularity and the high speed of data. (3) Increase opportunity to increase customer base from the existing customers who use 900 MHz spectrum (4) The company is ready to engage in the business of providing mobile services since the Company is a fully integrated telecommunications operator and has potential. Therefore, the Company has advantages over other operators, especially new entrants. (5) Reduce the risks of uncertainty of the next licensing auction and the expiration of the license of the spectrum that are currently available. IFA also considers factors that may be affected the transaction including: (1) The project requires high cost of investment, which may make the company lack of liquidity. (2)The increase of amortization of license may adversely affect the Company's income statement. (3) The increase of costs related to the license fee (4) The Company will have fee regarding to loans, an increase of interest expense, and higher ratio of interest bearing debt to shareholders equity. (5) The risk of the mobile phone service industry which has high penetration rate and negligible growth. (6) The risk of the competition in the mobile phone service industry from a new competitor. (7) The risk of the value of the next auction license may drop in the future. Wealthiest Advisory Co., Ltd Page 4

8 In case of the reasonableness of price, IFA is using approach for determining the reasonableness of the value of the transaction which are: (1) Comparison Approach using Prices Paid in the Same Spectrum Actions Abroad (2) The Feasibility Analysis of Mobile Phone Service Business after Obtaining the 1800 MHz and 900 MHz Spectrum License In case of (2.1) The Feasibility Analysis of Mobile Phone Service Business after Obtaining the 1800 MHz and 900 MHz Spectrum License In case of (2.2) The Feasibility Analysis of Mobile Phone Service Business does not obtain the 1800 MHz and 900 MHz Spectrum License IFA has found that approach (1), has several restrictions to evaluate since there are discrepancy in many areas such as regulatory, conditions of the auction, level of competition in the industry in each country, and this approach also does not the business plan and related investments taking into account. IFA has seen that approach (2) is more appropriate with the aim of using to evaluate the value of entering into the transaction which is the feasibility analysis of mobile phone service business of the Company, considering the past financial information of the Company and TUC, operating result of mobile phone service business during The main assumptions of the feasibility analysis are arise from the information received from the Company and under current economic situation. In conclusion, the investment in the project of 1800 MHz and 900 MHz Spectrum License for telecommunication business could give the return in the form of NPV and IRR. The base case basis provides a better investment return than the case that the Company did not have the license. After considering sensitivity analysis, IFA has found that the mobile phone service business of the Company has NPV between 7,676-18,872 million baht, IRR in the range of 12.94%-14.73% per year which is higher than WACC of the Company of 11.72%, and the payback period around years (Details shown in Part 4 he Reasonableness of the Price, Section 4.2). Nevertheless, the valuation of the value of Spectrum License of 1800 MHz and 900 MHz is not exact value, caused by the restrictions on the use of frequencies that are normally used together with other current spectrum to provide mobile services. However, the investment in this project can bring synergy benefits to the company's mobile business as well as the increasing of power of the Company s competitiveness, better performance of service, increase opportunities to reach new customers, reducing the risk of license auction in the future, which is also uncertain schedule. Moreover, the method to receive the two Spectrum Licenses were through an auction organized by the NBTC, which is a government agency, IFA has seen that the method is fair and transparent. The value the winning auction for license of each bidder is not very different from the other bidders. Therefore, IFA believes that investment in the project is appropriate. The IFA s opinion is that the investment in project of Spectrum License of 1800 MHz and 900 MHz for the telecommunication business is the reasonable transaction and the shareholders should vote in favor of approving the Transaction. Nevertheless, the final decision rests primarily with the individual shareholders. The shareholders should study the information contained in this report along with other related information provided and use his/her own judgment in making the final decision carefully. Wealthiest Advisory Co., Ltd Page 5

9 Part 1. The General Characteristics of the Transaction 1.1 Characteristics and Size of Transaction In accordance with the Act on Organization to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunication Services B.E (2010) ( Frequency Allocation ACT ), which is the law requiring the establishment of NBTC and assigned NBTC to authorize and regulate the operation of broadcast television and telecommunications commission to be fair and best interest to country and consumers. As part of the important content of Frequency Allocation ACT, stated that the entire spectrum which the various departments of the government are holding, are deemed to be the property of the public and must be returned to the NBTC within the prescribed period and the NBTC will allocate the spectrum and licenses to those who want to use the spectrum in the reasonable and fair manner to all parties. Moreover, According to Telecommunications Master Plan B.E No.1 of NBTC, there is the policy regarding to the spectrum management and the use of spectrum as a communication resource for the benefit for the public, taking into consideration the best interests of the public, the fair competition, and conducted in a manner that is distributed evenly in order to be the key factor in the development of economy and society. NBTC combines the spectrum that a concession ends with some spectrum which have been returned before the end of the concession and adjusting a guard band in order to manage spectrum efficiently to be use as the spectrum license for the auction. This can be summarized as follows: Concession of 1800 MHz Spectrum of CAT concessionaire concession Spectrum bandwidth expiry date True Move Co., Ltd* 15 Sep MHz / MHz 2X12.6 MHz Digital Phone Co., Ltd* 15 Sep MHz/ MHz 2X12.6 MHz The Allocation of 1800 MHz Spectrum and the Winner of Auction (on 16 November 2015) Winning Bidder License valid until Spectrum bandwidth Set 1 TUC 15 Sep MHz / MHz 2x15 MHz Set 2 Advance Wireless Network Co., Ltd 15 Sep MHz / MHz 2x15 MHz Concession of 900 MHz spectrum of TOT concessionaire concession expiry date Spectrum bandwidth AIS** 30 Sep MHz / MHz 2X17.5 MHz The Allocation of 900 MHz Spectrum and the Winner of Auction (on 21 December 2015) Winning Bidder License valid until Spectrum bandwidth Set 1 Jas Mobile Broadband Co., Ltd. 15 years after MHz / MHz 2x10 MHz Set 2 TUC obtaining License MHz / MHz 2x10 MHz Source : NBTC. Note : * Spectrum of True Move Co., Ltd and Digital phone Co., Ltd are expired under the concession agreement with CAT in the total of 25.2 MHz (12.6 MHz each), and NBTC combined this with the frequency of 4.8 MHz which early return by CAT. Such Wealthiest Advisory Co., Ltd Page 6

10 spectrum DTAC has entitled to possess through the concession agreement between two companies. The spectrum has been rearranged in order to make connectedly the auctioned spectrum of 30 MHz (15 MHz, 2 Licenses) ** Spectrum of AIS is expired under the concession agreement with TOT of 17.5 MHz. NBTC reduced the guard band from 3.5 MHz to 1 MHz. As a result, spectrum auction can increase by 2.5 MHz, to the total of 20 MHz (10 MHz, 2 Licenses) The Allocation of 1800 MHz Spectrum License The Allocation of 900 MHz Spectrum License Wealthiest Advisory Co., Ltd Page 7

11 The Company, a provider of entire telecommunications services has seen business opportunities from the growing number of subscribers and usage through wireless broadband of mobile phones and other smart devices and to increase the competitiveness of the Company. Therefore, Board of Directors Meeting No. 4/2015 held on 11 September 2015 has approved TUC, a 99.99% subsidiary of the Company, to participate in the auction process of Spectrum Licensing for International Mobile Telecommunications ( IMT ) ( Spectrum License ) of 1800 MHz for spectrum bandwidth covering 15 MHz and 900 MHz for spectrum bandwidth covering 10 MHz. On 11 September 2015, TUC submitted the application to participate in the auction for spectrum license of 1800 MHz, with the bandwidth of 15 MHz each for two spectrum licenses. 4 bidders participated in the auction. On 16 November 2015, NBTC had officially notified that TUC is the auction winner for 1800 MHz spectrum bandwidth covering MHz/ MHz (the first slot) at the total bid price of 39,792 million baht (VAT Excluded). TUC has taken steps to obtain a license by making the 1 st installment payment of auction fee and submit a letter of bank guarantee for the remaining amount of auction fee to NBTC on 25 November In this event, the license for 1800 MHz Spectrum of TUC shall be effective from 4 December 2015 to 15 September 2033, the license fees (excluding the annual fee of the license) are as follows: Installment Payment Period 1 Within 90 days after receiving the official notification of auction result and submit a letter of bank guarantee for the remaining amount of auction fee 50% of total auction fee License Fee (million baht) 19,896 (TUC made the 1 st installment payment of auction fee and submit a letter of bank guarantee for the remaining amount of auction fee on 25 Nov 2015) 2 Within 15 days after a lapse of 2 years from the date of 25% of total auction 9,948 obtaining the License fee 3 Within 15 days after a lapse of 3 years from the date of 25% of total auction 9,948 obtaining the License fee Total 39,792 Note: Auction fee above is VAT excluded While the auction for spectrum licensing of 900 MHz for spectrum with the bandwidth of 10 MHz each for two spectrum licenses. NBTC held the auction on 15 December 2015 which has 4 bidders. On 21 December 2015, NBTC had officially notified that TUC is the auction winner for 900 MHz spectrum bandwidth MHz / MHz (the second slot) at the total bid price of 76,298 million baht ( VAT Excluded). Wealthiest Advisory Co., Ltd Page 8

12 As the date of this report, the Company and TUC are in the preparation process for the financial evidence according to the license procedure. TUC shall pay the 1 st installment of auction fee and submit a letter of bank guarantee for the remaining amount of auction fee to NBTC within 21 March (within 90 days after receiving the official notification of auction result). The Company and TUC are expected to take such action to complete and receive the license before determined period. Moreover, TUC is obliged to pay the license fee (excluding the annual fee of the license) as follows. Installment Payment Period 1 Within 90 days after receiving the official notification of auction result and submit a letter of bank guarantee for the remaining amount of auction fee 2 Within 15 days after a lapse of 2 years from the date of obtaining the License and submit a letter of bank guarantee for the remaining amount of auction fee 3 Within 15 days after a lapse of 3 years from the date of obtaining the License and submit a letter of bank guarantee for the remaining amount of auction fee 4 Within 15 days after a lapse of 4 years from the date of obtaining the License License Fee (million baht) 50% of the minimum price of the licenses for 900 MHz spectrum 25% of the minimum price of the licenses for 900 MHz spectrum 25% of the minimum price of the licenses for 900 MHz spectrum 8,040 4,020 4,020 Remaining Amount 60,218 Total 76,298 Note: The fee above is VAT excluded, the minimum price of the license for 900 MHz is 16,080 million baht Moreover, there is an investment relating to the winning of auction of 1800 MHz and 900 MHz spectrum approximately 51,600 million baht or accounted for a total value of spectrum license of 1800 MHz and 900 MHz and investing in relevant mobile network is 167,690 million baht. After consideration based on the notification of Acquisition or Disposal of Assets, value of consideration based on the consolidated financial statement of the Company as of 31 December 2015 are as follows: The total value of consideration Unit: million baht 1) 1800 MHz Spectrum License bandwidth 15 MHz 39,792 2) 900 MHz Spectrum License bandwidth 10 MHz 76,298 3) Investment cost on related telecommunication networks of 1800 MHz and 51, MHz spectrum Total estimated amount to be paid or total value of consideration 167,690 Total Assets of the Company as of 31 December ,844 The portion of value of consideration to total assets of the Company 59.29% approximately Wealthiest Advisory Co., Ltd Page 9

13 Therefore after the consideration of Notification of Acquisition or Disposal of Assets, the transaction size is 59.29% of total assets of the Company which is considered as Type 1 Transaction which transaction size equal to 50% but less than 100%. Therefore, the Company is required to disclose the information memorandum regarding the Transaction to the Stock Exchange of Thailand ( SET ), appoint an independent financial advisor to provide the opinion to shareholders, and hold the shareholder meeting to consider and approve the Transaction. The Transaction must be approved by a resolution of no less than three-fourth (3/4) of the total number of votes of the shareholders who have the rights to vote or proxy (if any) who attend the meeting and entitled to vote. However, in order to entering into the aforesaid Transaction, the Company could not ask for the approval from shareholders prior to entering into the Transaction since the disclosure of amount of money for the auction or relating information such as investment budget, guidelines for operating mobile phone network expansion plans, and sources of funds in advance because it may undermine the company to participate in the auction. During the time of the auction, there were uncertainty that how many spectrum licenses TUC could win and how much value of the license. Moreover, in case that TUC is a winning bidder in the auction of spectrum license and investing in mobile phone network, the value of transaction may not be big enough to meet the criteria which require a shareholder approval according to the notification of Acquisition or Disposal of Assets. Therefore, the Company needs to take an action before getting approval of the Transaction from shareholders. To be legally binding, the Company shall acquire the right to use spectrum license and investment in relating matters, the Company has set the Annual General Meeting of the Shareholders 2016 on 8 April 2016 in order to approve the transaction above. 1.2 Date of the Transaction TUC received the Spectrum Licensing of 900 MHz Spectrum bandwidth covering MHz / MHz Bandwidth 15 MHz on 4 December While Spectrum Licensing of 900 MHz bandwidth covering MHz / MHz Bandwidth 10 MHz as TUC was the winning bidder in the auction, the Company and TUC have been in the process of preparing financial evidence according to the procedure to receive the license, TUC shall pay the 1 st installment of 50% of minimum price (16,080 million baht) of the licenses for 900 MHz spectrum or equivalent to 8,040 million baht (VAT excluded) and submit a letter of bank guarantee for the remaining amount of auction fee to NBTC within 21 March 2016 (within 90 days after receiving the official notification of auction result). The Company and TUC are expected to take such action to be completed and get license before the determined period while investment of the mobile phone network of 51,600 million baht in 2016 for an investment in Telecommunication Network for rendering services regarding 4G LTE technology. Wealthiest Advisory Co., Ltd Page 10

14 1.3 Related Parties and Relationship Licensor : NBTC Licensee : TUC; TUC is a 99.99% subsidiary of the Company, established on 30 March 2010, paid-up capital 84, million baht, and shareholders list are as follows: (as of 29 September 2015) No Name Number of Shares (Shares) % Holding (%) 1. True Corporation Public Company Limited 8,484,438, Asia Wireless Communication Company Limited Mr. Vichaow Rakphongphairoj Total 8,484,438, Remark: The par value is 10 Baht Relationship : NBTC has no relationship with the Company, TUC, and subsidiaries of the Company in a manner as a connected person under the Notification of the Capital Market Supervisory Board Tor.Jor. 21/2008 Re: Connected Transaction Rules dated 31 August 2008 (as amended) and Notification of the Board of Governors of the Stock exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies concerning the Connected Transactions, 2003 dated 19 November 2003 (as amended). 1.4 Details of Acquired Assets (1) The 1800 MHz Spectrum License for spectrum bandwidth of 15 MHz, covering MHz and pairing to MHz, which are valid from 4 December 2015 (the date that TUC obtained the license) until 15 September (2) The 900 MHz Spectrum License for spectrum bandwidth size 10 MHz, covering MHz and pairing to MHz, which with validation of 15 years from the date of obtaining the license. As the date of publish this report, the Company and TUC are during the preparation of the financial evidence according to the procedure to receive the license. TUC shall pay the 1 st installment of auction fee 8,040 million baht (VAT excluded) and submit a letter of bank guarantee for the remaining amount of auction fee to NBTC within 21 March (within 90 days after receiving the official notification of auction result). (3) Assets resulting from investments related to 1800 MHz and 900 MHz Spectrum are telecommunication networks and transmitter device, which utilize to support the use of 1800 MHz and 900 MHz spectrum license, worth about 51,600 million baht. Wealthiest Advisory Co., Ltd Page 11

15 1.5 Total Value of Consideration The total value of acquiring 1800 MHz spectrum license bandwidth size 15 MHz and 900 MHz spectrum license bandwidth size 10 MHz, are determined by the auction arranged by NBTC, the government agency and each spectrum license had 4 bidders. In this regard, NBTC is the one who set the conditions, procedures and the rights of the bidders which is obligated to all bidders. While the investment in the assets relating to 1800 MHz and 900 MHz spectrum is based on the investment budget as approved by Board of Directors Meeting No. 4/2015 held on 11 September 2015 and Board of Directors Meeting No. 1/2016 held on 29 January Source of Funds According to Information Memorandum relating to significantly acquire of assets and capital increase as the Company disclose to SET on 1 February and 29 February Funds to be used to acquire 1800 MHz bandwidth of 15 MHz and 900 MHz bandwidth of 15 MHz spectrum and the investment in relevant matters are in the total amount of 167,900 million baht. Part of the source of fund would be from capital increase through Transferable Subscription Rights ( TSR ) of 60,000 million baht, divided by exercise price. However, the Company shall issue TSR in the amount of not exceeding 15,000 million shares to existing shareholder in proportion to the existing shareholders respective shareholdings under the Rights Offering for free. The exercise ratio of TSR is 1 TSR to 1 newly-issued ordinary share of the Company and the exercise ratio is 90 percent of the market price, whereby the market price means the weighted average price of the Company's shares in the Stock Exchange of Thailand since 3 March March 2016 (the fraction of the calculation shall be rounded off to the nearest multiple of 5 satang. the Company has set the Annual General Meeting of the Shareholders 2016 on 8 April In this event, IFA has estimated the value of capital increase of the Company, expected to be utilized under specific purposes as disclosed in Information Memorandum as follows: Estimates of amounts expected to be received from the exercise of TSR Number of ordinary shares increasing from the exercise of TSR 1 Estimated Exercise Price of TSR 1 (baht/share) Amount of Money (million baht) The amount expected to be received from the capital increase 10, ,000 Purpose Making a loan repayment within the 3rd quarter of 2016 or when those loan is due for the payment - Bonds 26,000 - Bill of Exchange 14,000 Total loan repayment (approximately) 40,000 Investment in mobile business and others (approximately) 20,000 Wealthiest Advisory Co., Ltd Page 12

16 Note: 1 IFA assumes that the number of TSR units issued to existing shareholders is 10,169 million units, and the unitholders would exercise the right to purchase newly issued shares in full amount. The number of ordinary shares resulting from the exercise of TSR is l 10,169 million shares at the exercise price of 5.90 baht per share (calculated based on 90 percent of the average price of the last 20 business days from 19 January 2016 to 15 February 2016, equivalent to 6.54 baht per share) in the table above. IFA makes the estimation based on the purpose of the capital increase, which the company has announced to SET on 1 February 2016 and 29 February Moreover, IFA has estimated the impact that will occur on the financial structure of the Company by adjusting the audited consolidated financial statements as of 31 December 2015 with the impacts that is expected to be occurred after the Company received the proceeds from the capital as follows: (unit: million baht) Before Impact from Capital After Capital Items Capital Increase Increase (Decrease) Increase Cash and Cash Equivalent 1 10,593 20,000 30,593 Interest Bearing Debt 98,052 (40,000) 58,052 Shareholder Equity 74,547 60, ,547 Note: 1. including the short-term investment of 2.8 million baht From the table above, after the capital increases, IFA expects that the Company would have cash about 30,000 million baht which consists of the investment in mobile business and others approximately 20,000 million Baht. Moreover, the Company has the ability to borrow more money as a result of the increase of shareholders' equity, the ratio of interest bearing debt to shareholders equity decrease by 1.32 time approximately to 0.43 time. In this event, IFA has summarized cash outflow regarding to the 1800 MHz Spectrum License, 900 MHz Spectrum License, and investment plan for procuring telecommunication networks as follows: License Fee and Investment (million baht) Total 1800 MHz Spectrum License (Already paid on 25 November 2015) 19, MHz Spectrum License - - 9,948 9, , MHz Spectrum License - 8,040-4,020 4,020 60,218-76,298 Investment plan for procuring telecommunication networks 1-20,000 5,000 7,000 7,000 7,000 5,600 51,600 Total 19,896 28,040 14,948 20,968 11,020 67,218 5, ,690 Note: 1. showing the investment value to be proposed for the approval from shareholder meeting 2016, excluding annual investment of the mobile phone business of the year , which will have an investment of approximately 6,000-8,000 million baht per year. From the table above, the highest projected cash outflow value is in 2020 which is 67,218 million baht, which the source of this funds will be from the capital increase in 2016 of 20,000 million baht (based on above assumption from IFA) and the remaining funds will be from loans from financial institution and/or the issuance of bonds. After the capital increase, IFA expected that the Company will have the ratio of interest bearing debt to shareholders equity of 0.43 time will result in the Company being to borrow money from financial institution and/or issuance of bonds at the appropriate rate considering the ability to raise capital by borrowing money in the past. Wealthiest Advisory Co., Ltd Page 13

17 Moreover, in 2015, the Company has EBITDA about 22,000 million baht per year which would help to support this transaction. In addition, the Company also has a business partner, a supplier of network, thereby it can facilitate the payment terms of the investment in network in accordance with the cash flow of the Company. 1.7 The summarized of key terms of agreements Spectrum License of 1800 MHz and 900 MHz Spectrum License of 1800 MHz Spectrum License of 900 MHz Spectrum License No. NBTC/FREQ/TEL/55/2 (During the fulfillment of condition precedent before (1 st Amendment) issuing the license) Bandwidth covering MHz pairing to Bandwidth covering MHz pairing to MHz 960 MHz Effective since 3 December 2015 to 15 September Effective 15 years from the date of obtaining the 2033 license The payment of the auction fee are in 3 installment The payment of the auction fee are in 4 installment as follows: as follows: The 1 st installment pay 50% of total auction fee within The 1 st installment pay the auction fee of 8, days after receiving the official notification of million baht within 90 days after receiving the official auction result notification of auction result The 2 nd installment pay 25% of total auction fee The 2 nd installment pay the auction fee of 4,020 Within 15 days after a lapse of 2 years from the date million baht within 15 days after a lapse of 2 years of obtaining the License from the date of obtaining the License The 3 rd installment pay 25% of total auction fee The 3 rd installment pay the auction fee of 4,020 Within 15 days after a lapse of 3 years from the date million baht within 15 days after a lapse of 3 years of obtaining the License from the date of obtaining the License The 4 th installment pay the remaining amount Within 15 days after a lapse of 4 years from the date of obtaining the License If the Company does not make a payment within the time specified in the agreements, the Company must pay an additional 15% of the remaining auction amount. Coverage obligation as follows; - Not less than 40% of total population within 4 years from the date of obtaining the License - Not less than 50% of total population within 8 years from the date of obtaining the License Coverage obligation as follows; - Not less than 50% of total population within 4 years from the date of obtaining the License - Not less than 80% of total population within 8 years from the date of obtaining the License If the Company fails to fulfill the conditions within a specified period, the Company must pay a daily fine of 0.05% of the auction price of the license throughout time that cannot fulfill the conditions within a specified Wealthiest Advisory Co., Ltd Page 14

18 Spectrum License of 1800 MHz Spectrum License No. NBTC/FREQ/TEL/55/2 (1 st Amendment) period. Spectrum License of 900 MHz (During the fulfillment of condition precedent before issuing the license) The licensee must submit a management plan for the service to the Board at least two years before the license ends. The licensee shall pay the fee as follows; - Fee for Type Three Telecommunication Business License at the maximum rate of 1.5% per year of revenue before deducing expenses. - Allocate funds to BTFP for public interest at the rate of 3.75% of net income - Network must support the speed of data of File Transfer Protocol (FTP) of not less than the following; - Download : For 3G and above, not less than 345 kbps and For 2G, not less than 48 kbps - Upload : For 3G and above, not less than 153 kbps and For 2G, not less than 20 kbps Provide the Communication Network with the Capacity at least 10% of their total communication network to Mobile Virtual Network Operation MVNO, who does not have relationship with the licensee when the service is requested. Start to provide the service within 2 year after date of approval of the service plan and investment plan, and report the operating result every month until the date of providing service. In the event that the licensee has violated or failed to comply with conditions of a dispute, the Secretary of NTC has the power to order the licensee to edit/perform correctly. The licensee has the right to appeal to the NBTC within 15 days of receiving the order and the decision of the Commission NBTC shall be final. If the licensee fails to comply with the orders of the Secretary of NTC and there period of appeal is over, the Secretary of NTC shall impose fines of not less than 20,000 baht/day. In the event that the licensee is not perform correctly, the NBTC has authority suspended or revoked license. IFA can summarize the terms of the 1800 MHz and 900 MHz Spectrum License as follows: The payment of license fees which is apart from the capital increase in 2016, IFA provides an estimate of cash flows of TUC and expects that the demand for additional funds is up to about 50,000 million baht in 2020, the year of the last installment of spectrum licenses 900 MHz. IFA expects that the Company or TUC will have the potential to borrow and maintain the financial ratio to comply with the condition of financial institutions. Considering the ability to borrow in the past, financial structure of the company improved after the capital increase. (See details on the topic of the estimated cash flow and the sufficiency of capital resources in Section 4.2.1). As the investment plan in infrastructure and accessories for developing of 4G-LTE of 51,600 million baht and the investment for maintenance and optimizing the network for another year about 6,000-8,000 million baht continuously, representing a total investment of more than 138,000 million baht for the TUC in order to build networks to provide the services cover the Wealthiest Advisory Co., Ltd Page 15

19 population coverage to meet the conditions confidently. TUC estimates to build networks faster than the schedule and it is expected to be completed within 1-2 years. TUC has to provide the services as soon as possible to accommodate the volume of customers is expected to rise sharply. Moreover, the track record in the part has shown that TUC can build the network to be ready before the specified period and never has any dispute in this case. Thus, IFA believes that TUC can manage the network to be ready on the specified period of time. TUC can organize a network with a capacity of at least 10% of their entire network infrastructure to provide MVNO- mobile phone service providers without their own network. In practice, the measuring of the capacity of the network to be allocated to MVNO is determined by the average of the entire network which this could be the density of the network in urban areas and light in the countryside after calculated on an average basis, TUC can manage the network under the condition and also has no disputes on such issues. Presently, the network of TUC can provide a maximum download speed of 42 Mbps -100 Mbps (the speed of actual usage depends on many factors, such as mobile phones, active area, packages available, the number of users in the area, time period of using, etc.), which is higher than the minimum requirements of the license and is expected to speed up in the future according to the plan to invest in network development. TUC can provide services immediately after the approval of the services and investment plans. Wealthiest Advisory Co., Ltd Page 16

20 Summary of Letter of Guarantee (LG) LG for 1800 MHz Spectrum LG for 900 MHz Spectrum Agreement Date 16 December 2015 Agreement Date 5 February 2016 and 12 February 2016 Issued by Issued by Bangkok Bank Public Company Limited Bangkok Bank Public Company Limited The Siam Commercial Bank Public Company Limited Kasikornbank Public Company Limited The Siam Commercial Bank Public Company Limited Krungthai Bank Public Company Limited Kiatnakin Bank Public Company Limited Bank of China (Thai) Public Company Limited Credit Line of LG of 21, million baht Credit Line of LG of 38, million baht and 35, million baht In order to guarantee payment for the 2 nd and 3 rd In order to guarantee payment for the 2 nd,3 rd and 4 th installment for the Spectrum License of 1,800 MHz installment for the Spectrum License of 900 MHz. Front-end Fee and account maintenance fee of 0.7% -1.1% TUC has prepared a letter of guarantee (LG) with the commercial banks to use as collateral for the payment of license fees, including VAT under the conditions for obtaining a license to use spectrum in 900 MHz and 1800 MHz for the NBTC in a total of 94, million baht which consists of. Credit Line of LG of 21, million baht for Spectrum License of 1800 MHz, issued by Bangkok Bank Public Company Limited and The Siam Commercial Bank Public Company Limited Credit Line of LG of 73, million baht for Spectrum License of 900 MHz, issued by Bangkok Bank Public Company Limited, Kasikornbank Public Company Limited, The Siam Commercial Bank Public Company Limited, Krungthai Bank Public Company Limited, Kiatnakin Bank Public Company Limited, and Bank of China (Thai) Public Company Limited. IFA has summarized that the key terms in LG, which the Company, TUC and its subsidiaries have to comply with the conditions as follows: The ability to pay the license fee - TUC is responsible for payment of license fees, including VAT to NBTC. After the payment terms for each period are as follows. Table of license Fee Payment (VAT included) THB million Total 1800 MHz 10,644 10, , MHz - 4,301 4,301 64,433 73,036 Total 10,644 14,946 4,301 64,433 94,325 Wealthiest Advisory Co., Ltd Page 17

21 When considering the financial viability of the TUC in order to pay licensing fees over the period mentioned above. IFA has analyzed the financial projections of TUC in the future and has seen that TUC has potential to make the payment of such fees from: The capital increase of the company in 2016 about 60,000 million baht, of which approximately 20,000 million baht fund to be used for mobile business and cash flow from the business of providing mobile services of TUC about 10,000 million per year, while the remaining is expected to be chosen by the TUC in the forms of loans from financial institutions and/or the issuance of bonds, depending on the interest rates at that time. Especially in 2020, TUC has the last installment of 900 MHz spectrum license in the amount of 64,433 million baht. IFA expects that the demand for additional funds is up to about 50,000 million baht. Considering the ability to borrow and financial structure of the company in the past, IFA expects that the Company and TUC could raising funds by take loans from financial institutions and/or the issuance of bonds as well as maintain the financial ratio to comply with the condition of financial institutions (See details on the topic of the estimated cash flow and the sufficiency of capital resources in Section 4.2.1). The ability to pay LG fees TUC is subject to pay front-end and account maintenance fees for the total amount of THB 4,427 million. However, the payment scheme is scheduled to make payments annually in proportion to the outstanding balance, which gradually decreases toward the end of the agreement. In 2016, TUC is to pay approximately THB 1,903 million. IFA puts these factors into the projection to assess the opinion for this report and concludes that these terms of payment are doable. Other terms and conditions Besides, the Letter of Guarantee also specified other terms and conditions deemed as general conditions applying to commercial banks customers i.e. undertaking by subsidiaries and a group of company, maintaining a majority shareholders in Telecommunication operation, maintaining financial ratio etc. IFA considers these agreements can be followed. Wealthiest Advisory Co., Ltd Page 18

22 Part 2. Details of the Company and TUC 2.1 Details of the Company As shown in Annual Report attached with this invitation letter for shareholder meeting 2.2 Details of TUC TUC (formerly Real Future Company Limited ), registered under the Civil and Commercial Code on 30 March 2010, registration number is Head office is located at 18 True Tower, Ratchadapisek Road, Huay Kwang, Bangkok. TUC is subsidiary of the Company, the Company holds 8,484,438,697 of TUC shares or equivalent to 99.99% of paid-up capital. TUC is the Group s holding company and a type-3 telecom operator, and indirectly holds an equity interest in TrueMove (previously TA Orange Co., Ltd.) and Real Move (a CAT Telecom s 3G+ reseller under the flagship brand, TrueMove H) through a subsidiary, Bangkok Inter Teletech Public Company Limited (BITCO), which is subsidiary of True Group. In December 2012, TUC participated in the auction of the 2.1 GHz Spectrum License and was later granted the aforementioned license and this extends the Group s mobile business until at least In March 2013, TrueMove H was the first operator in Thailand to launch 4G LTE services on the 2.1 GHz spectrum, covering important business areas in Bangkok such as Siam Square, Silom, and Sathorn which is the expansion of 3G network continuously (Source: Form 56-1 of the Company of 2014). During the year ended of 2015, TUC participated in the auction of the 1800 MHz and 900 MHz and granted both aforesaid license. As a result, TRUE group has four frequency bands (850 MHz/900 MHz/1800 MHz and 2100MHz) covering bandwidth of 55 MHz, TRUE has achieved the highest bandwidth among mobile phone providers in Thailand and it is expected to provide full service within As of December 2015, TUC has a number of mobile service subscribers approximately 19.1 million and has total revenue of 82,671 million baht. 2.3 Directors of TUC As of 20 January 2016, TUC has name list of directors as follows 1. Mr. Suphachai Chearavanont 2. Mr. Vichaow Rakphongphairoj 3. Mr. Athueck Asvanund 4. Mr. Noppadol Dej-Udom 5. Miss Sarinthra Wongsuphalak Two directors shall jointly sign together with affixation of TUC seal. In regards to the signing of the financial statements and relating documents, and Human Resource and relating documents, one of the two directors shall sign with the TUC s seal affixed. (Source: the Certificate of TUC as of 20 January 2016). Wealthiest Advisory Co., Ltd Page 19

23 2.4 Shareholders of TUC No Name Number of Shares (Shares) % Holding (%) 1. True Corporation Public Company Limited 8,484,438, Asia Wireless Communication Company Limited Mr. Vichaow Rakphongphairoj Total 8,484,438, Source: Shareholder List of TUC as of 29 September Summary of Financial Position of TUC during (From the Management s Discussion and Analysis for the Fiscal year 2015, which was disclosed to SET and audited financial statement of TUC) Items Consolidated Financial Statement 31 Dec Dec Dec 2015 THB million % THB million % THB million % Cash and cash equivalent 7, , , Trade and other receivables 33, , , Inventory-net 4, , , Other current assets 2, , , Total current assets 48, , , Property, plant and equipment, net 40, , , Intangible assets, net 23, , , Other non-current assets 2, , , Total non-current assets 66, , , Total Assets 114, , , Short-term borrowings 1, , Trade and other payables 53, , , Current portion of long-term borrowings 1, , Short-term loans from related parties , , License payable within one year 3, , Other current liabilities 2, , , Total current liabilities 62, , , Long-term borrowings 26, , Accrued license fee 3, , Other non-current liabilities 9, , , Total non-current liabilities 38, , , Total liabilities 101, , , Paid-up capital 46, , , Retained Earning (Deficit) (25,389) (22.1) (30,940) (21.6) (29,823) (16.4) Other components of equity (8,210) (7.2) (8,210) (5.7) (8,210) (4.5) Non-controlling interests Total shareholders equity 12, , , Total liabilities and shareholders equity 114, , , Wealthiest Advisory Co., Ltd Page 20

24 Items Consolidated Financial Statement 31 Dec Dec Dec 2015 THB million % THB million % THB million % Revenue from providing services 35, , , Revenue from interconnection 4, , , Revenue from network rental 8, , , Revenue from product sales 16, , , Total Revenue 64, , , Cost of Providing Services Cost of providing service (excluding the cost of interconnection) 20, , , Interconnection cost 5, , , Regulatory cost 2, Depreciation and amortization 8, , , Total cost of providing services 37, , , Cost of Sales 15, , , Selling and administrative expenses (SG&A) Cash SG&A 14, , , Depreciation and amortization 1, , , Total Selling and administrative expenses 16, , , EBITDA 4, , , Operating Profit (4,851) (7.6) (1,715) (2.3) Interest income Interest expense (4,476) (7.0) (1,699) (2.3) (976) (1.2) Other financial fee (642) (1.0) (585) (0.8) (199) (0.2) Income tax (expense) revenue (1,092) (1.7) 2, (11) (0.0) Income (loss) from continuing operations (11,010) (17.2) (1,088) (1.5) (424) (0.5) (Income) loss attributable to non-controlling interests Non- recurring items (6,697) (10.4) (4,569) (6.2) 1, Net profit (loss) for the year (17,696) (27.6) (5,645) (7.6) 1, True Mobile Group True Mobile Group s service revenue growing at an unprecedented rate of 17.3% in 2015 while the other major players in the industry had a combined growth rate of only 0.3%.This drove the Group s cellular value share to 20.8% in 4Q15, up from 17.8% in 4Q14 and 19.6% in 3Q15, where the key driver was an accelerating growth in the non-voice segment. True Mobile Group ended 2015 with 19.1 million subscribers while blended ARPU continued its upward trend, increasing to Baht 204 in 4Q15 from Baht 184 in the previous quarter and Baht 134 in the same period a year ago. Postpaid acquisition remained strong and outgrew the industry, representing 58% of the Q4 market net adds while prepaid customers picked up in the fourth quarter after being pressured by the prepaid registration regulation. Wealthiest Advisory Co., Ltd Page 21

25 True Mobile Group s cellular service revenue achieved outstanding growth throughout 2015, jumping 17.3% YoY to Baht 45.1 billion due to an upsurge of non-voice revenue, which grew 40.5% YoY to Baht 23.4 billion, representing 52% of True Mobile Group s service revenue. This strong performance was owing to the Group s relentless efforts on expanding networks along with rapid growth of mobile Internet usage in both prepaid and postpaid segments. Voice revenue declined 3.0% YoY to Baht 18.5 billion following consumers rising trend towards data usage. The business continued penetration into the mass postpaid segment, including those successfully migrated from the prepaid platform, helped soften the voice decline. Revenue from international roaming and other services were Baht 3.1 billion, increasing from the previous year partly due to more tourist arrivals and additional revenues from providing mobile network at the offshore facility of corporate customer. Product sales increased 3.6% YoY to Baht 16.8 billion on higher contribution from iphone and house-branded devices under the True Smart Series. Net IC expense decreased 17.7% from the previous year to Baht 761 million supported by IC rate reduction from Baht 0.45 per minute to Baht 0.34 per minute since July Regulatory cost increased 11.3% YoY to Baht 422 million following solid revenue growth. EBITDA surged 30.3% YoY to Baht 10.1 billion on a significant revenue growth, strongly outpacing higher core operating expenses. Depreciation and amortization expenses were flat (-0.7%) at Baht 9.4 billion as the complete depreciation of TrueMove s mobile network assets offset amortization costs related to the 1800MHz license granted in December and device-bundling campaigns to expand the Group s 4G and 3G subscriptions. Interest expense dropped 42.6% YoY to Baht 976 million following the successful recapitalization in September 2014, enabling the Group to remove all bank loans while issuing bonds at more competitive borrowing rates. Net profit to shareholders of the parent company was Baht 1.1 billion, sharply improving from a loss of Baht 5.6 billion in 2014 due to higher operating profit and a drop of expenses related to 2G depreciation and interest. Wealthiest Advisory Co., Ltd Page 22

26 2.6 Summary of the mobile services industry How mobile network works When the Caller wants to call Receiver by dial and press the call button. The phone will send data to the base transceiver station of the network provider which the Caller used. After that, the base transceiver station of the network provider will be centered on the transmission of signals between Caller and the telephone exchange. When the telephone exchange received the signal from the phone, it will analyze the number and transfer the signal to the base transceiver station of the network provider which the Receiver used. The base transceiver station of the Receiver can be whether the same station as the Caller. When the call to the telephone of the Receiver and there is availability. The Caller will hear a Ring Back Tone, telling that the call has already reached the Receiver. If the Receiver accepts the call, the Caller can make a conversation. Source: Thai Telecommunications Encyclopedia Industry overview For the overall industry of mobile phone service, there are 3 main providers which are AIS, DTAC, and TRUE. The revenues from mobile phone service has growth continuously. In 2015, the revenues was over 210,000 million baht (Revenue from providing service only, excluding income from the sale of equipment, etc.) which had the growth rate of revenue from services to about 3 percent compared to Voice Revenue Million 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-35,438 34,894 34,117 33,372 32,403 31,452 29,969 29,529 28,858 27,507 26,052 25,905 19,932 19,373 19,164 18,807 17,977 17,630 16,756 16,651 16,253 15,731 14,478 14,085 10,777 10,956 10,161 9,849 9,400 9,226 8,390 8,220 7,754 7,328 7,086 7,084 4,729 4,565 4,792 4,716 5,026 4,596 4,823 4,658 4,851 4,448 4,488 4,736 TRUE DTAC AIS Wealthiest Advisory Co., Ltd Page 23

27 Non-voice revenue Million 35,000 30,000 25,000 20,000 15,000 10,000 5,000-27,555 28,785 26,233 23,666 24,813 21,030 22,195 19,654 7,483 7,767 7,850 8,158 9,243 10,233 10,971 11,59512,287 12,97313,759 14,174 15,50816,319 17,36718,110 5,000 5,374 5,926 6,283 6,575 6,869 7,045 7,322 7,456 7,607 7,784 7,899 3,025 3,178 3,591 3,669 3,836 3,928 4,179 4,749 5,070 5,653 6,012 6,712 TRUE DTAC AIS Source: AIS ( DTAC ( and the Company After considering type of services which are two main types: Voice and Non-Voice services. The Non-Voice services was mobile internet service, data, message, and content. The revenue from Voice of all providers decreased significantly and continuously. In 2015, the revenue from Voice services was in the total amount of 108,000 million baht, decreasing by 12% compared to 2014 and the revenue from Voice services for the quarter also decreased continuously. While Revenues from non-voice services increased significantly because of the changing of consumer behavior by using the Internet on mobile phones. In 2015, revenue from Non-Voice services was worth 107,000 million baht, increased by 24% compared to 2014 and an increase of nearly one times within three years and the Non-Voice service revenues in the quarter has increased steadily. Interesting issues is that revenues from Non-Voice services have been growing dramatically and they were close to revenue from Voice services, especially in the quarter 3-4 of 2015, showed that revenues from Non-Voice services were worth more than the revenue from Voice services and were expected to be worth more than the revenue in the near future. Considering the number of subscribers, it was found that in 2015, there was 82.9 million subscribers which is down by 14% compared to After considering the type of service, it was found that number of Prepaid subscriber was of 68.4 million subscribers, decreasing by 18% compared to 2014, due mainly to the impact of the end of the period the compulsory register SIM mobile prepaid in mid of 2015, while the number of Postpaid is 14.5 million subscribers, increasing by 14% compared to 2014, necessitating the use of Postpaid tends to increase steadily since the postpaid subscribers have various packages of unlimited data for monthly usage. Wealthiest Advisory Co., Ltd Page 24

28 Number of Subscribers (Prepaid) Million TRUE DTAC AIS Number of Subscribers (Postpaid) Million TRUE DTAC AIS Source: AIS ( DTAC ( and the Company After taking the consideration on total number of subscribers, it was found that the biggest market share was AIS with the market share of 38.5 million subscribers or 46.5% of total market share, 2 nd rank was DTAC with the market share of 25.3 million subscribers or 30.4% of total market share, and 3 rd rank was TRUE with the market share of 19.1 million subscribers or 23.1% of the total market share. After considering the market share for each type of service, it was found that Prepaid subscriber of AIS had the biggest market share of 48.3%, 2 nd rank was DTAC with the market share of 30.6, and 3 rd rank was TRUE with the market share of 21.1%. However, the market share of Postpaid subscriber, it was found that the market share of the three providers were not significantly different, the 1 st rank was AIS with the market share of 37.6%, 2 nd rank was TRUE with the market share of 32.5%, and 3 rd rank was DTAC with the market share 29.9%. Wealthiest Advisory Co., Ltd Page 25

29 250 ARPU- Prepaid (baht/number/month) AIS DTAC TRUE (baht/number/month) ARPU- Postpaid AIS DTAC TRUE Source: AIS ( DTAC ( and the Company After considering ARPU of the mobile phone providers prepaid subscribers, it was found that as of December 2015, AIS had the highest ARPU, 195 baht per month, followed by DTAC with ARPU about 162 baht per month while TRUE had ARPU about 111 baht per month. ARPU of 3 main providers tended to increase continuously. ARPU of the mobile phone providers postpaid subscribers, it was found that as of December 2015, AIS had the highest ARPU of 612 baht per month, followed by DTAC with ARPU about 519 baht per month while TRUE had ARPU about 502 baht per month. The ARPU of AIS and DTAC decreased continuously. Conversely, ARPU of TRUE tended to increase and close to ARPU of AIS and DTAC. Wealthiest Advisory Co., Ltd Page 26

30 400 ARPU - Blended (baht/number/month) AIS DTAC TRUE Source: AIS ( DTAC ( and the Company ARPU of the mobile phone providers as of December 2015, it was found that AIS had the highest ARPU of 254 baht per month, followed by DTAC with ARPU about 220 baht per month while TRUE had ARPU about 204 baht per month. ARPU of 3 main providers tended to increase continuously, especially ARPU of TRUE, which had the highest growth rate and had been in an upward trend constantly, since its prepaid mobile users had low ARPU and postpaid mobile users with higher ARPU had been increasing rapidly. Wealthiest Advisory Co., Ltd Page 27

31 Part. 3Appropriateness and Advantages of the Transaction 3.1 The Objective of the Transaction (1) The revenue structure of the mobile services industry is changing from the revenue from voice services to a non-voice services which is demand for Bandwidth in order to support the use in future The overall value of the mobile phone service industry as of December 2015 was approximately 300,000 million baht per year. Revenue from the mobile services can be divided into three categories, which are voice services, non-voice services including internet or data (about 90% percent of revenue from nonvoice services), content and messaging services, and other income such as income from the sale of SIM cards and etc. Considering the trend of the industry's revenue in the last five years ( ), it has found that the proportion of Non-voice revenue increased steadily according to the advancement of technology and devices that make data transfer faster and more efficiently as a result the consumers tends to use data via their mobile phones on a daily basis, such as the use of a Wireless broadband VDO call, news, watch highdefinition movies and television, online shopping, money transfer, and bill payment services, etc. The estimates use the Internet connection on 3G and 4G data are about GB per month. The proportion of income from Non-voice began to account for more than revenues from Voice in quarter 3/2015, the contribution from Non-voice approximately 45% of total revenue of the industry and likely to increase continuously. Revenue proportion for mobile phone service industry 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 61% 15% 24% 61% 15% 23% 60% 17% 23% 60% 17% 22% 59% 19% 22% 58% 20% 22% 57% 22% 21% 56% 23% 21% 55% 24% 21% 54% 26% 20% 56% 30% 14% 54% 31% 15% 53% 33% 14% 51% 35% 14% 48% 37% 15% 46% 39% 15% 44% 40% 15% 43% 42% 16% 40% 45% 14% 38% 47% 15% Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012 Q3/2012 Q4/2012 Q1/2013 Q2/2013 Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015 Q3/2015 Q4/2015 Voice Non-voice Other Source: NBTC. In addition, according to the NBTC information, after that the auction for 3G spectrum for 2100 MHz in late 2012, which was the beginning of changing technology that speeds up the connection and data transfer emphasizing on high-speed wireless connectivity, the efficiency in the transmission of information and the use of multimedia service perfectly as a result the number of subscribers of Non-voice, mostly use Wealthiest Advisory Co., Ltd Page 28

32 the Data has increased significantly, from about 6.4 million subscribers during Q4/2012 to approximately 27.9 million subscribers in Q3/2015 while the Voice technology-focused or 2G service subscribers has dropped dramatically from about 14 million subscribers to about 4.8 million subscribers during the same period. The Company therefore needed to increase the spectrum to accommodate the use of services based on user behavior and changing of technology in the future. Number of subscribers for 2G, 3G and beyond Source: NBTC After winning the auction and compliance with the conditions, the Company and the TUC will be the provider of mobile services on a four-band with Bandwidth in the total of 55 MHz including 850 MHz spectrum bandwidth 15 MHz, 2100 MHz spectrum bandwidth 15 MHz, 1800 MHz spectrum bandwidth 15 MHz and 900 MHz spectrum bandwidth 15 MHz. In this event, the entering to the auction of TUC for 1800 MHz and 900 MHz Spectrum License and win the auction, high and low frequency spectrum would enhance their ability to serve customers and improve the efficiency and competitiveness of mobile business. The increase in the size of Bandwidth would increase the efficiency of data transmission, likely to increase and use to support user demand for Multimedia and transferring large amounts of data through applications. Consumers will demands for the use of Data and would like high speed of data transfer in areas where the demand for high-volume data such as Bangkok and major cities and also reducing bottlenecks problem in some service areas, especially in the areas not in major cities. Since the Company will have the increase of Bandwidth of low frequency of 25 MHz (850 MHz spectrum bandwidth of 15 MHz and 900 MHz spectrum bandwidth 10 MHz), the spectrum is suitable for areas in provinces that may have to use the data in low volume but have coverage in wide area. Moreover, the Company also has a potential to increase its customer base from AIS, which an ex-owner of the 900 MHz spectrum, from the advantages of the company in terms of coverage and signal quality. Furthermore, with the development of Carrier aggregation, all frequency in an area could be used in with the technology 4G LTE Advanced, to be even more effective in the long traffic and have higher speed Wealthiest Advisory Co., Ltd Page 29

33 than ever for various applications such as the development of new applications that require high download speed or access to certain areas of the spectrum that have different weaknesses such as supplement of 900 MHz to 2100 MHz frequency in the building or the connecting of 900 MHz with 850 MHz instead of 2100 MHz in rural areas or bringing 900 MHz bandwidth 10 MHz to combine with 10 MHz bandwidth of 1800 MHz spectrum, and 10 MHz bandwidth of 2100 MHz spectrum which resulting in the a download speed which increase up to 225 Mbps. In order to combine the spectrum effectively, the Company should have a spectrum accumulation and the Company need to allocate the bandwidth of not less than 20 MHz to be effective and there would not reduce the effectiveness of the rest bandwidth. Therefore, the Company now has total of 55 MHz, which is sufficient to allocate to quality to help create a competitive advantage in the long-term competitive advantage in the quality of its service. Features of various types of spectrums 850 MHz 900 MHz 2100 MHz 1800 MHz frequency range Low band High band Coverage Cover wide area Suitable for use in areas where demand is not very high data volumes and can pass through obstruction well Suitable for Upcountry Cover narrower area than low frequency The clarity of the signal and fast Data transmission Suitable for use in areas where there is a demand in high-volume or density such as Bangkok and major provinces. Estimated the coverage area of low frequency band (less than 1000 MHz) comparing to high frequency band (above 1000 MHz) Source: Low frequency band 850MHz/900MHz which can cover a wide area and high frequency band 1800 MHz / 2100 MHz which has high capacity of signal. The company plans to allocate spectrum for various devices that support the technology as follows. Wealthiest Advisory Co., Ltd Page 30

34 Technology Spectrum (MHz) G G G Total ( 2) Operating results from the company's mobile services are significant and increasing in proportion The Company began to provide Non-Voice in full integrated, which is the first service provider, in 2011 after having an agreement with CAT, a provider of 3G technology HSPA (High Speed Packet Access) on 850 MHz nationwide which is an important step resulting in the increase of the number of users Data. Further, the Company has launched 3G services on the spectrum of 2100 MHz in the early of 2013, and 4G LTE in mid-2015, which has been very popular as the data demand is increasing and fast data transfer in accordance with the advancement of technology. Most of the users are beginning to change from a Prepaid to postpaid subscribers to be corresponding to the amount data that the customer wants on each month. The Company has monthly core package 3G-4G, the available Data is between 0.75 GB and 20 GB per month and the package includes voice, which is about 199-1,899 baht per month. While there are the customers who are still using prepaid, and it has paid for the purchasing of a Data about baht over the period and/or the Data to be used, resulting in the ARPU of mobile phone service business increased from around 126 baht in quarter 1/2013 to 204 baht in the quarter 4/2015. The proportion of the revenues from the business of providing mobile services to total revenues from services of the Company increased from last year. Moreover, the revenues from the business of providing mobile services has the highest growth rate compared to other business, which has the growth rate between the , representing CAGR of around 13 percent per year, showing the importance of mobile phone service business trends on the Company s performance in the future. Revenue from services 2012 % 2013 % 2014 % 2015 % (million baht) True Mobile* 31,184 45% 35,211 47% 38,406 51% 45,052 54% True Online (Internet Broadband) 28,126 40% 28,658 39% 25,602 34% 26,798 32% True Vision (Pay TV) 10,463 15% 10,728 14% 10,803 15% 11,981 14% Total 69, % 74, % 74, % 83, % Source: The Company * Excludes the revenue from rental of network and interconnection charge Wealthiest Advisory Co., Ltd Page 31

35 Number of Subscriber of Postpaid, Prepaid, and ARPU of the Company Total Subscriber (miilion) ARPU Number of Subscribers (Prepaid) ARPU (Postpaid) Number of Subscribers (Postpaid) ARPU (Prepaid) Source: the Company *As of December 31, 2015, the Company had a total number of subscribers of 19.1 million numbers, which consists of Prepaid of 14.4 million subscribers and Postpaid of 4.7 million subscribers. The number of prepaid subscribers in the quarter 1-3/2015 decreased, due to the impact of the change in reporting the number of customers who use Prepaid during the 1st quarter, excluding inactive customers of 2.2 million users, and the impact of the end of the period the compulsory register SIM mobile system Prepaid in quarter 2 and 3, about 3.3 million users. In addition, considering the details of the revenue from the mobile operator's quarterly of the Company, it has found that Revenue from Non-voice services is more than revenue from Voice services since the quarter 4/2014 due to revenues from Data services which has high growth of approximately 30% compared to the same quarter of last year. In quarter 4/2015, the Company has revenues from Non-voice services of 6,712 million baht and revenues from voice services of 4,736 million baht, or the revenue from Non-voice services is 59% of revenues from services. (Excluding revenue from rental of interconnection and Interconnection Charge), which is in line with the trend of users who use more Data through Smart devices and other advanced technology and lower prices. As revenue from Voice services was flat and will start to decline in the latter since the user has more option of calling and communications through Application. IFA estimates that the trend is still continuing in accordance with the development of technology providers, from 2G which focused on providing voice services as a core service and only few data provided to 3G-4G LTE which is used presently, which has the highest download speeds of up to approximately 100 Mbps and focused on the high speed data such as VDO call, Application, and Multimedia HDTV, etc. In addition, it is expected that by the year of 2020, will begin to use the technology 5G, which has the estimated download speed of about 10Gbps and expected usage of Data per user will increase significantly. All these Wealthiest Advisory Co., Ltd Page 32

36 factors are all key criteria caused the company to have the number of spectrum on hand to secure of business and to meet the needs of service users and technological changes in the future. Revenue from Voice and Non-Voice Services of the Company Quarterly ( ) Revenue (million baht) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, % 70.7% 70.0% 50.5% 60.0% 50.4% 43.9% 43.9% 41.3% 50.0% 32.7% 26.8%23.6% 29.4% 32.2% 40.0% 30.0% 16.4% 20.0% 6.3% -5.3% -7.2% -0.6% -2.6% 0.7% 0.6% -1.2% -3.5% -3.2%-6.9% 1.7% 10.0% 0.0% -10.0% -20.0% %change YoY Voice Non-voice Voice %chg YoY Non-voice %chg YoY Source: The Company * Excludes the revenue from rental of network and interconnection charge Wealthiest Advisory Co., Ltd Page 33

37 3.2 The Advantages of Entering into the Transaction (1) Increase competitiveness of the company In case that the Company has acquired Spectrum License of 1800 MHz and 900 MHz, total Bandwidth of 25 MHz will resulting to the Company to has total Bandwidth of 55 MHz on four-frequency bands which can summarize as follows: Spectrum Bandwidth Expiry Year 850 MHz 15 MHz MHz 15 MHz MHz 10 MHz MHz 15 MHz 2033 Total 55 MHz Comparing to competitors who participate in this auction, it was found that the Company can provide clients on a wide range of frequencies than competitive since the Company has the low frequency that is appropriate for the area in the province which the demand for data on the volume is not very high but covers a wide and high frequency for areas with demand for data in high doses, such as Bangkok and major provinces. Moreover, the Company also has the highest average number of Bandwidth per customer in the industry, which is about 2.88 Hz to one subscriber while the main competitors has only about Hz to one subscriber. It has to be said that the two spectrum will help improve infrastructure and competitiveness of mobile business and also improvement of the existing restrictions on the provision of services in remote areas and support the growing trend of user behavior which has high demand. The Company has the spectrum that is correspond to the current situation for the consumer who demand for a Multimedia and transferring large amounts of data through the Application. The increase of potential for the competition will help the Company to have competitive advantage and the possession of spectrum license would result in psychological confidence in the future of the service as well as creating difficulties in the marketing of new competitors. Providers Spectrum Number of Average Bandwidth/Customer Total 850 MHz 900 MHz 1800 MHz 2100 MHz Customer (million) (Hz/Customer) The Company 15 MHz 10 MHz 15 MHz 15 MHz 55 MHz AIS MHz 15 MHz 30 MHz DTAC 10 MHz - 25 MHz 15 MHz 50 MHz JAS - 10 MHz MHz - - Source: AIS DTAC JAS the Company (2) To support the growing business of mobile phone service of company Section 3.1 (2) shows that the proportion of revenue accounted for the company's mobile business increased steadily and a growth rate higher than the other businesses especially, revenues from data services, which has an average growth rate of over 30% per year. Therefore, the acquisition of the two Wealthiest Advisory Co., Ltd Page 34

38 spectrums, IFA expected that will help stabilize the business of mobile services and support the growing number of users in the future as well as the use of data per user, which is expected to increase rapidly in the future. (3) Opportunities to increase customer base According to the allocation plan of the Company, it has found that some of the 900 MHz spectrum which the Company will use to provide 2G services, will have the opportunity to increase number of existing customer base of the 900 MHz spectrum that was originally provided by AIS. In this segment, there are approximately 12 million subscribers, mainly in the provinces and remote areas and using Prepaid (Source: Positioning 7 January 2016) and the phone device that this group of customer use is supported only in the 900 MHz spectrum. According to the data from AIS as of December 2015, prepaid subscribers have ARPU of around baht per month, higher than the ARPU of the Company's prepaid, which is about 111 baht per month. Therefore, in the case that the Company owns 900 MHz spectrum license from the auction, the Company has the opportunity to expand into the provinces and remote areas and the opportunity to increase ARPU. This will increase the growth of the Company's mobile phone business. Moreover, the company also offers 2G/3G/4G, which can support all types. (4) The Company has potential to engage in the business of providing mobile services. The Company is a fully integrated telecommunications providers and then there are potential and advantages over other operators especially new operators such as (A) The Company has a number of customer base and has an established reputation in the field of services specifically, the coverage and reliability of mobile applications and Data in urban areas which use the use a large amount of Voice and Data. (B) The Company provides a full range of telecommunications services, including mobile Internet broadband and Pay TV packages, so it can be arranged in the value price for any type of users. (C) The Company has infrastructure for providing mobile services such as telecommunications tower and DIF of 20,000 towers and has supporting agencies such as True Shop which has 250 shops nationwide, partner about 100 dealers, technical team, maintenance team, and other services. (D) Since the Company has a number of frequency bands, it can be provided by using technology LTE Carrier Aggregation, which bring the spectrum several districts together to increase the speed of data transmission on the network, which in the Carrier Aggregation will require a broad spectrum of at least 20 MHz. However, in order to get the highest quality in the frequency spectrum for the technical integration, the Company should have the frequency band exceeding than the minimum frequency. In this case, the Company has a total frequency to 55 MHz, the estimated speed of integration techniques will be faster than LTE technology approximately one times. (E) The Company has China Mobile as shareholders, which has expertise in global telecommunications and ready to support the technique and finance such as negotiating payment terms with suppliers abroad, with China Mobile's major trading partners. Wealthiest Advisory Co., Ltd Page 35

39 (F) TUC get the approved for letter of guarantee for 1800 MHz and 900 MHz spectrum from banks and TUC has received Spectrum License of 1800 MHz and is in the process of obtaining Spectrum License of 900 MHz. The Company expects to complete this and received license before the specified period. (5) Reduce the risks of uncertainty of license in the next auction and the expiration of the other spectrum license In the past, the auctions of spectrum licenses were postponed from Legal issues and other issues such as the auction of 2100 MHz spectrum during the year of , the postpone of the 1800 MHz spectrum auction during the year of , the postpone of the 900 MHz spectrum auction in late Therefore, in the case that the Company can bid for Spectrum License of 1800 MHz and 900 MHz, this makes it possible to reduce the risk of postponing the license auction which may affect the continuity of the mobile operator which is currently the core business of the Company. Also, the acquiring of license in this time, could help extend the license of the Company is around , where the original contract for services of 850 MHz band spectrum with CAT will expire in 2025, and the license for 2100 MHz spectrum is expired in Wealthiest Advisory Co., Ltd Page 36

40 3.3 Disadvantages and Risk of Entering into the Transaction (1) The project requires high cost of investment may make the company lack of liquidity This auction for spectrum licensing of 1800 MHz and 900 MHz, the Company has to pay for total bid price for this auction of 116,090 million baht (VAT excluded) and there is also the investment plan for procuring telecommunication networks about 51,600 million baht, which is considered as the highest investment of TUC and the Company. Even the payment is made in 3-4 installments under the condition of each license, the largest amount of cash out flow for investing in mobile network and 1800 MHz and 900 MHz Spectrum License will occur in 2020, worth about 60,000 million baht/year which may affect the Company s liquidity. The Company expects that this investment will use the source of funds from capital increase and loans from financial institutions. Moreover, after the capital increase, the ratio of interest bearing debt to shareholders equity will be 0.43 times, then the Company has better ability to asking for the loans (more details on Section 1.6 Source of fund). In addition, as nature of business of the Company has stable cash flow, which would help to support the loan repayment. Moreover, this investment has been considered the feasibility analysis by the financial institutions. TUC received the approval of LG for making a payment of 1800 MHz and 900 MHz Spectrum License. IFA estimates that the likelihood of liquidity problems of TUC and the Company would be limited. (2) The increase of amortization of license In this transaction, the Company will have amortization expense for 1800 MHz Spectrum License approximately 2,200 million baht/year and 900 MHz spectrum license about 5,100 million baht/year (straight line method), the mentioned expenses may adversely affect the Company's income statement. However, the amortization expense is non-cash expense which does not affect cash flow of TUC and the Company. Particularly, a significant impact on cash flow of the TUC and the company will occur during the installment payment of 1800 MHz and 900 MH Spectrum License during (3) The increase of costs related to the license fee According to the conditions under the Spectrum License, TUC is required to pay the fee of 1.5% per annum of the revenue from telecommunication services to NBTC and 3.75% of net income (after deducting expenses as defined by the Regulations of the NBTC such as Interconnection charge) to BTFP. (4) The Company will have fee regarding to loans, an increase of interest expense, and higher ratio of interest bearing debt to shareholders equity. In this transaction, there are the front-end fee of 0.7%-1% of LG and annual fee of 1.0% - 1.1% per year of LG and interest expense, especially during the beginning period of the investment, TUC and the Company has to pay for the spectrum license and relating investment, which may affect the Company s operation result. In addition, the case of making a loan agreement, financial institutions may impose such conditions as follows: Wealthiest Advisory Co., Ltd Page 37

41 Maintain the financial ratio Increase Paid-up Capital However, considering the financial status after the adjustment of impact of the capital increase (details on Section 1.6 source of fund), it was found that the Company would have cash about 30,000 million baht, this may result a not large amount of loan required or issuance of bonds. While after the capital increase, IFA expects that the ratio of interest bearing debt to shareholders equity of the Company is 0.43 time which is considered as not too high. Moreover, the average interest rate of loans from financial institutions and debentures is about 4% per year, lower than the market rate. In addition, in 2015, the company's EBITDA is approximately 22,000 million baht which 10,000 million baht is from the mobile business, which can help to support loan repayment and to reduce the impact of interest expense partially. (5) The risk of the mobile phone service industry which has high penetration rate Presently, the mobile phone services industry continues to have a high and steadily increasing of the competition. The providers still continue to focus on investments to expand network coverage across the country, including a various package and supporting devices to users to migrate existing customers who use services on 2G to 3G-4G and service and the moving of users from other providers to use their service. As of December 2015, the number of mobile phone is around 83 million subscribers, which compared to the population is accounted for penetration rate of the rate of about 124%. However, IFA estimates that, if the total number of mobile number dropped by about 12 million subscribers as a result of adjustments to reported numbers for the services of the providers excluding the total number of inactive users and impact from the register of mobile phone number in mid-2015, the real Penetration rate would have been higher than 140 percent, meaning that the future growth of the mobile phone services industry and the number of new users coming into the industry would be less. Moreover, there will be high competition in the industry such as reducing the service charge for the customers who move to use their service, and/or charge the price of the equipment for new users at a low price or lower than their cost, which is considered a risk factor for future earnings of TUC and the Company, which may have induce a lower return on investment. Mobile Penetration rate (%) 160% 140% 120% 100% 80% 60% 40% 20% 0% 139% 145% 128% 117% 124% 109% 93% 99% 80% 61% 47% Post-Paid Pre-Paid Total Penetration Source: NBTC Note: In 2015, the number of mobile phone decrease since the concession of 900 MHz spectrum license of one provider expires. Wealthiest Advisory Co., Ltd Page 38

42 However, the considering of the market share during Quarter 1/2013 4/2015, using revenue from postpaid subscribers, which is the major income for service provider now and in the future, it was found that the Company's market share increased from 19.5% in Quarter 1/2013 to 23.3% in Quarter 4/2015, which shows that the company's approach to business carried out correctly and the company has a good network and nationwide coverage, the 3 G service is covering over 97% of the population, while the 4 G service, covering over 80% of the population nationwide, which can create confidence to users of the service. In case that TUC, a subsidiary of the Company has Spectrum License of 1800 MHz and 900 MHz will enhance the competitiveness of the company for the customers in the city and the business district with has high volume of mobile phone usage and service on the 900 MHz spectrum can cover a wider area as well. Therefore, the risk of uncertainty operating results should be limited under the controlling factors. Market share of Postpaid (%) AIS DTAC TRUE Source: AIS ( DTAC ( and the Company (6) The risk of the competition in the mobile phone service industry from a new competitor In the spectrum license auction this time, there was a new competitor winning the auction of 900 MHz spectrum which may cause a price war and the new form of competition would be more intense than ever especially in a less data volume area in the countryside area, which is a new target customer base of the Company. Therefore this high competition can cause the Company to have a number of new customers that do not meet expectations. However, the Company has the several advantages over the new competitors such as the number of customer base, management experience in a mobile phone industry, the potential to raise funds, an established reputation in the field of services, and the infrastructure for the provision of mobile services are already available. Moreover, the price competition is likely to be limited because the cost of license of each auction winner is not very different. While the increase of the volume of data competition also limited as well since a new competitor has only 10 MHz Bandwidth, thus providing a large the volume of data service seems Wealthiest Advisory Co., Ltd Page 39

43 to be a competition only for specific number of customers. All of these factors will help mitigate the risk of competition from a new competitors. (7) The risk of the value of the auction license which may drop in the future As NBTC has the auction spectrum license in three times in the past (2100 MHz in 2012, 1800 MHz and 900 MHz in 2015), the value of the auction create a lot of revenue to government. Therefore, the government may consider taking the spectrum that the concessions expired to the auction to create revenue to the government (700/850/1800/2600 MHz spectrum), the increase of supply volume could push down the value of the license. As the Company has obligation to pay a license to use the spectrum in 1800 MHz and 900 MHz and the investment involved, it may affect the competitiveness of companies in the license auction next time. If the Company is unable to attend the auction or not win a license in the future, it may result in the Company's operating costs higher than competitors who obtain a new license with a lower cost. As the allocation plan for the future auction of spectrum license remains uncertain. The possession license will enable the company to build a strategy to obtain customers as the first mover and have a continuation of the investment plan as well as a business plan for the future with confidence. Wealthiest Advisory Co., Ltd Page 40

44 3.4 Other Options in case of not Entering into the Transaction In case that the company does not entering into the Transaction, the Company has the options which are providing mobile services on existing spectrum and/or participate in the next auction. If the Company does not participate in the auction or does not win the auction in this time, the Company still can continue to provide mobile services on the existing spectrum. Moreover, the Company may use the funds that have been prepared for this auction to invest in the network and other infrastructure instead. It may also be used in the marketing expenses such as a reduction of device price or provide the device to some groups of customers for free in order to increase the number of customers and usage. However, licenses to use spectrum is a limited resource and there is a risk in the allocation of spectrum that a concession will expire in the future, especially low frequency spectrum, such as 850 MHz, which expires in 2025, which could be applied in the business sector of high-speed train and used in disaster management. As a result, 900 MHz spectrum may be only a low frequency spectrum which will be surviving, The low frequency spectrum is worth for the investment and has low cost of investment in the tower network, which is appropriate for network expansion in the countryside. In addition, the 1800 MHz and 900 MHz spectrum have been used to operate for number of years since Thailand started providing mobile phone users, which has the large number of customers using the service and a lot of compatible devices. Therefore, if the Company does not participate or does not win the auction, the Company might lose its ability to compete with other providers. In terms of spectrum to support future customer service and the opportunity to compete for customers which used to be the customers of other competitor and had been the weakness of the Company for years. Therefore, it is considered a major turning point in the business of mobile services. Moreover, it also helps mitigate the risk of the potential postpone of the license auction which had been happened several times in the past 4-5 years. Wealthiest Advisory Co., Ltd Page 41

45 Part. 4The Reasonableness of the Price In the process of evaluating the value of 1800 MHz and 900 MHz Spectrum License, IFA used material and information from the Company such as the audited financial statements of the Company and TUC, which have been prepared and certified by a Certified Public Accountant, the operation of mobile business during , terms and conditions of 1800 MHz Spectrum License, major assumptions of financial projection, the trend of mobile phone service industry, information about number of subscribers and service charge rate as well as the management interview. IFA also included available public information to analyze and give the opinion on the appropriate value of 1800 MHz and 900 MHz spectrum license. However, the analysis and opinion of IFA is under the assumption that all information above is complete and accurate. All the assumptions found in this report were based on the possibility of occurrence during the time this report was prepared. If such information and other external factors changes such as details and conditions of the license, it could significantly impact on the business and may cause the estimated fair value of the license has changed significantly. There are two approaches to evaluate the reasonable of Spectrum License of 1800 MHz and 900 MHz as follows. (1) Comparison Approach using Prices Paid in the Same Spectrum Actions Abroad and (2) The Feasibility Analysis of Mobile Phone Service Business after Obtaining the 1800 MHz and 900 MHz Spectrum License compared to the case that the Company does not obtain the1800 MHz and 900 MHz Spectrum License 4.1 Comparison Approach using Prices Paid in the Same Spectrum Actions Abroad In this approach, IFA compared the value of 1800 MHz and 900 MHz Spectrum License which TUC won the auction with the prices paid in the same spectrum actions abroad during last 4-5 years since it is the latest information and the industry begin to be more competitive than in the past, which is considered a similar situation as the spectrum auction in Thailand during the year end of 2015, as follows: 1800 MHz Spectrum License TUC, a 99.99% subsidiary of the Company, received the officially notified from NBTC on 11 September 2015 that TUC was the auction winner for one license of 1800 MHz spectrum for International Mobile Telecommunications at the total bid price of 39,792 million baht (VAT excluded), the license is effective from 4 December 2015 to 15 September In comparison, the prices paid in the same spectrum auctions in each country are adjusted by the size of Bandwidth and number of population in order to show the value of spectrum license size of 1 bandwidth used to provide services to 1 people. In case of TUC, the value of spectrum license per 1 MHZ per number of population is about 39.2 baht/mhz/people (39,792 million baht/ 15 MHz / 67.7 million people). IFA summarized the information of the auction of 1800 MHZ spectrum license abroad during as follows: Wealthiest Advisory Co., Ltd Page 42

46 1800 MHz South Korea Singapore Italy Greece India Germany Thai (TUC) Number of population (million people) , GDP/Population (million baht) ARPU (baht/pop./month) 893 1, Year of Auction Number of Bidders Bid Price (Baht/MHz/Pop.) Mobile penetration rate 110% 151% 159% 124% 73% 132% 124% Source: Bid price/mhz/people of South Korea, Singapore, Italy, India and Greece from International benchmarking of 900 MHz and 1800 MHz spectrum value (September 2013) Final Report for Ofcom by Dotecon Ltd. Bid price/mhz/people of Germany from GDP/population (million baht) and number of population from World Bank Mobile penetration rate of abroad: reference to Central Intelligence Agency Mobile penetration rate of Thailand from NBTC Note: Exchange rate as of 5 February 2016 from BOT From the table above, it has found that the value of 1800 MHZ Spectrum License of TUC is 39.2 baht/mhz/people, which is in the 2 nd rank. The overall value of Spectrum License of 1800 MHz is between baht/mhz/people or average of 25.9 baht/mhz/people. The auction in South Korea has highest bid price while Greece has the lowest bid price. Auction Fee(THB/Hz/population) of 1800 MHz Spectrum S.Korea Thailand(TUC) Singapore Italy Germany India Greece THB Wealthiest Advisory Co., Ltd Page 43

47 900 MHz Spectrum License TUC received the officially notified from NBTC on 21 December 2015 that TUC was the auction winner for one license of 900 MHz spectrum for International Mobile Telecommunications at the total bid price of 76,298 million baht (VAT Excluded), the license is effective 15 years from the date obtaining the license. In case of 900 MHz Spectrum License of TUC, the value of spectrum license per 1 MHZ per number of population is about baht/mhz/people (76,298 million baht/ 15 MHz / 67.7 million people). IFA summarized the information of the auction of 900 MHZ spectrum license abroad during as follows: 900 MHz Hong Kong Spain Greece Hungary Romania Germany Thai (TUC) Number of population (million people) 67.7 GDP/Population (million baht) ARPU (baht/pop./month) Year of Auction Number of Bidders Bid Price (Baht/MHz/Pop.) Mobile penetration rate 229% 108% 124% 116% 104% 132% 124% Source: Bid price/mhz/people of Hong Kong, Hungary, Greece, Spain, and Romania from International benchmarking of 900 MHz and 1800 MHz spectrum value (September 2013) Final Report for Ofcom by Dotecon Ltd. Bid price/mhz/people of Germany GDP/population (million baht) and number of population from World Bank Mobile penetration rate of abroad: reference to Central Intelligence Agency Mobile penetration rate of Thailand from NBTC Note: Exchange rate as of 5 February 2016 from BOT From the table above, it has found that the value of 900 MHZ Spectrum License of TUC is baht/mhz/people, which is in the 2 nd rank. The overall value of Spectrum License of 900 MHz is between baht/mhz/people or average of 53.7 baht/mhz/people. The auction in Hong Kong has highest bid price while Germany has the lowest bid price. Wealthiest Advisory Co., Ltd Page 44

48 Auction Fee(THB/Hz/population) of 900 MHz Spectrum Hongkong Thailand(TUC) Hungary Greece Spain Romania Germany THB However, IFA has seen that this valuations approach could show the big picture of the value of the license auction for spectrum in the 1800 MHz and 900 MHz in each country only and may not be appropriate to assess the real value of the license. Due to this approach has some limitations which are; (A) Regardless of economic conditions and the mobile industry in each country is different such as an average income per capita, the number of mobile service providers, a market share of each provider, Penetration rate of mobile phones and Smart phones, which could affect the revenue growth and the number of mobile phone users in different countries. As a result, the competitive auction and price of spectrum license may vary. (B) Regulations, forms and conditions of the auction of licenses may vary from country to country such as the number of bidders, size of Bandwidth, and number of licenses in each auction as well as the conditions after the auction such as the terms of payment for the license, License fee and financial support to the relevant authorities, the coverage of the network as well as the rates of service charge as specified in the license. This may cause the difficulty of the comparison of the value of the license resulting from an auction in each country. (C) Regardless of the business plan and management practices after obtaining a license of the bidders such as the ability to compete in the future, total investment in the mobile network. The different way of the competitiveness of each provider which affect the price of the license auction bided by each service provider. Wealthiest Advisory Co., Ltd Page 45

49 4.2 The Feasibility Analysis of Mobile Phone Service Business after Obtaining the 1800MHz and 900MHz Spectrum License compared to the case that the Company does not obtain the1800 MHz and 900 MHz Spectrum License The acquired assets are 1800 MHz Spectrum License worth 39,792 million baht, 900 MHz Spectrum License worth 76,298 million baht and the investment plan for procuring telecommunication networks about 51,600 million baht ( the Project ), which has the total amount of investment of 167,690 million baht. To evaluate the return on investment, IFA prepared Free Cash Flow to Firm; ("FCFF") and use various tools to measure the feasibility of the project and estimate the return on investment from the Project as follows: - Net Present Value : NPV by using Weighted Average Cost of Capital: WACC as a Discount rate - Internal Rate of Return : IRR of the Project - Payback Period of the Project However, IFA is unable to calculate a specific fair value of the each spectrum license since all frequencies are designed to work together depending on the type of devices and service area. Therefore, it is unable to segregate the exact revenues and costs of each spectrum to be evaluated individually. To determine the reasonableness of the transaction, IFA estimated the overall value of the return on mobile phone business, which is the sharing use of all spectrum to see the expected future cash flows generated by the mobile phone business of the Company after obtaining the licenses to use the spectrum of 1800 MHz and 900 MHz compared to the estimated expected future cash flows which is expected to be generated by the mobile phone service business of the Company in case that the Company does not obtain the two Spectrum Licenses to justify the difference in an expected return based on the financial statements of the mobile phone service business during the years , key assumptions which prepared by management of the Company and the TUC. IFA has adjusted some assumptions to reflect market conditions and competition in the industry, including general economic conditions in conservative basis. The preparation of financial projections to calculate the NPV, IRR, and Payback Period based on financial assumptions are as follows The feasibility analysis of mobile phone service business after obtain 1800 MHz and 900 MHz Consideration approach and Projection Period In the preparation of the projection, IFA prepared in the way that the investment is as infrastructure of the Company, which the two Spectrum Licenses and related investments has been used for entire Company's mobile business as same as the other spectrums of the Company. All helps to support the use of mobile phone users at the present and is expected to increase in the future. The projection is based on Wealthiest Advisory Co., Ltd Page 46

50 revenue from services and cost of services and other expenses in cash items, adjusted by cash outflows, amortization of license and depreciation, expected to arise from the investment in this project in order to see the net cash flow from mobile phone service business, which is expected to occur in each year of projection after obtaining 1800 MHz and 900 MHz spectrum license and used with the existing spectrums of the Company. TUC already received 1800 MHz Spectrum License from NBTC, the license is effective from 4 December 2015 to 15 September While the 900 MHz Spectrum License, the Company and TUC has executed in the agreement for LG with financial institution already, this license is effective 15 years from the date obtaining the license. The preparation of projections, IFA assumes that to project revenue recognized from 1 January September 2033, or about 17 years and 9 months according to the longest license in this Project (1800 MHz), and there is no terminal value after the end of projection period. Revenue from mobile phone service - Number of Prepaid subscriber IFA assumes that the number of Prepaid on the starting date of projection is approximately 14.4 million subscribers, according to the numbering of prepaid system of the Company in In 2016 and 2017, IFA estimated that there will be new customers about 3.5 million subscribers and 1 million subscribers respectively, expected to come from the customer base of the former service provider's of 900 MHz spectrum, which has the existing subscribers of 12 million subscribers. Moreover, some of the prepaid users of the Company declined during the period the compulsory registration of mobile phone SIM Prepaid system in mid of 2015 which is about 3.3 million subscribers. IFA assumes number of new subscribers in 2016 derived from - An estimation of 2 million out of 7-8 million of subscribers* (under the service of the former 900 MHz-operator) who, still, have not yet upgraded their 2G-handset. Once, the auctioned License is granted, which we estimate TUC license will be inforce on March 14 th, 2016, all services provided by the original 900 MHz-operator must be terminated and 7-8 millions of SIM cards will not be usable, unless, the original service operator agrees with TUC s remedy plan offering to continue the receiving of 900 MHz transmitted by TUC s network, either way, we estimate 2 million of transferring or mobile number portability is achievable. - A projection of 1.5 million of subscribers from a part of an existing group of customers whose services were terminated due to the Mandatory registration of SIM cards and a part of the newcomers. News releases, so far, reported new accounts of approx. 1 million of Prepaid and Postpaid subscribers by the end of Q1/2016 *Source: The new customers accounted for approximately 30% percent of the total customer base as mentioned above. While the customers during , IFA assumes that the number of subscribers increased by a net of about 250,000 subscribers per year. During 2027 (the year that 2100 MHz Spectrum License expire) to the end of the projection, IFA assumes that the number of subscribers is stable. Wealthiest Advisory Co., Ltd Page 47

51 The growth rate of the number of prepaid subscriber for the period of projection, is the CAGR of around 2.3% per year, which is lower than the CAGR of the total number of mobile phone service in the prepaid system in Thailand during 10 years ( ), which is 10.2%. IFA has seen that the mobile industry in the past has been growing very fast and by the year of 2015 the penetration rate is approximately 124%, implying that the number of new subscribers may not as high as in the past and the growth rate is forecasted to decrease. Also, some of prepaid subscribers would switch to postpaid due to a package that is suitable for data usage and has less restriction. Moreover, this will make the projection in conservative basis. - ARPU of Prepaid IFA assumes the ARPU of Prepaid is 111 baht per month for the forecast period according to ARPU of Prepaid in However, ARPU of prepaid of the Company is an increasing trend. Also, the customer base of spectrum in 900 MHz of existing provider which the Company expects to be able to share the market share has higher ARPU than the Company. Therefore, in order to adhere to a conservative basis, IFA assumes that of Prepaid ARPU is 111 baht per month without a growth. From the assumption above, the summarized of subscribers and revenue from Prepaid are as follows Prepaid 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Number of subscribers at the beginning (million subscribers) Increasing number of subscribers during the period (million subscribers) Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Prepaid (million baht) 21,512 24,509 25,341 25,674 26,007 26,340 26,673 27,006 27,339 Prepaid 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Number of subscribers at the beginning (million subscribers) Increasing number of subscribers during the period (million subscribers) Wealthiest Advisory Co., Ltd Page 48

52 Prepaid 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Prepaid (million baht) 27,672 28,005 28,172 28,172 28,172 28,172 28,172 28,172 19,836 - Number of Postpaid subscriber IFA assumes that the number of Postpaid on the starting date of projection is approximately 4.7 million subscribers, according to the numbering of postpaid system of the Company in In the projection, IFA estimated that there will be new customers about 700,000 subscribers per year since the starting date of projection to 2026, which is in accordance with the number of Postpaid subscriber of the Company which increase during , about 700,000 subscribers per year, which has both existing customers of the Company who are switching from prepaid to postpaid because of the promotion and discount offered by the Company and new subscribers. During 2027 (the year that 2100 MHz spectrum license expires) to the end of the projection, IFA assumes that the number of subscribers is stable. The growth rate of the number of prepaid subscriber for the period of projection, is the CAGR of around 5.9% per year, which is lower than the CAGR of the total number of mobile phone service in the postpaid system in Thailand during 10 years ( ), which is 12.5% which is in the manner of the conservative basis. -ARPU of Postpaid IFA assumes ARPU of postpaid is 502 baht per month according to ARPU of prepaid in 2015 and will be stable throughout the forecast period. IFA has seen that the competitiveness of business-related services, such as Internet broadband and mobile Data has been competed for a period of time, the service changes are not driven by market forces and it will be competition in term of the increase of volume of data to users, rather than a price reduction. Considering the proportion of revenue from data usage and the behavior of consumers using the phone to connect to the Internet, the competition by increasing data volume is more suitable. Considering the setting of tariff for voice and data services prescribed by NBTC (on average, lower than the average tariff of mobile phone service using 2.1 GHz spectrum), at the end of 3 rd quarter of 2015, TUC charged voice and data services on an average of THB 0.46 per min and THB 0.16 per min respectively, complying to THB 0.72 per min and THB 0.26 per min. capped by the regulator. IFA forecasts the downward trend of tariff for data services for the period of the projection since the company tends to launch campaign that hold competitive price, while increase data service volume to Wealthiest Advisory Co., Ltd Page 49

53 customer, hence, lower the ratio of MB per unit. With this regard, IFA expects the company will abide by the regulation set in the future. An average tariff for Voice and Mobile Internet by the end of 3 rd quarter of Voice(THB/Min) Mobile Internet(THB/MB) AIS DTAC TRUE Source : NBTC From the assumption above, the summarized of subscribers and revenue from postpaid are as follows Postpaid 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Number of subscribers at the beginning (million subscribers) Increasing number of subscribers during the period (million subscribers) Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Postpaid (million baht) 30,421 34,638 38,855 43,072 47,288 51,505 55,722 59,939 64,156 Postpaid 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Number of subscribers at the beginning (million subscribers) Wealthiest Advisory Co., Ltd Page 50

54 Postpaid 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Increasing number of subscribers during the period (million subscribers) Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Postpaid (million baht) 68,372 72,589 74,698 74,698 74,698 74,698 74,698 74,698 52,595 - ARPU of postpaid and postpaid subscribers Overall, an average ARPU is between baht per month. The number of subscribers will increase from approximately 19.1 million subscribers at the starting date of projection (1 January 2016) to be 33.6 million subscribers at the end of projection (15 September 2033), the CAGR of the total number of subscriber is approximately 3.4% per year. The proportion of revenues Prepaid: Postpaid, at the starting date of projection is 44%:56% to 27%:73% at the end of projection. - Bandwidth per subscriber IFA estimates the Bandwidth per subscriber (Hz/unit) of the mobile phone service according to the assumption that, there is the increase in numbers of subscribers as projected above, which has found that, the Bandwidth per subscriber in the future is fall between Hz/unit. The IFA agreed that there is a possibility of serving, as a ratio is similar to other providers. In December 2015, the Bandwidth per subscriber of other two providers is about 0.78 and 1.98 Hz/unit Bandwidth per Subscriber (Hz/unit) F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Note: 850 MHz Spectrum License expired in 3/8/2025, 2100 MHz Spectrum License expired in 6/10/2027, 900 MHz Spectrum License expected to expire in 21/3/2031, and 1800 MHz Spectrum License expired in 15/9/ Revenue from other services include revenues from International roaming and long-distance calls between countries. In the projection, IFA assumed that, it will be equal to 7.5% of total revenues from mobile phone services throughout the projections, based on the historical proportion between the years Wealthiest Advisory Co., Ltd Page 51

55 (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Revenue from other services 3,895 4,436 4,815 5,156 5,497 5,838 6,180 6,521 6,862 (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Revenue from other services 7,203 7,545 7,715 7,715 7,715 7,715 7,715 7,715 5,432 Interconnection Charge; IC is the revenue arising from the interconnection charge, if there is a user from other mobile phone operators contract the number which uses the Company s service. This revenue will increase, if the network is expanded to cover more area in the future. The projection, IFA assumed that it will be equal to 11% of revenues from mobile phone services throughout the projection period, which is close to the historical ratio in IFA used the historical ratio in 2015 since rate of IC will be updated regularly as announced by the NBTC each year. The revenue from interconnection charge are as follows: (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Interconnection Charge 6,141 6,994 7,591 8,129 8,667 9,205 9,743 10,281 10,819 (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Interconnection Charge 11,357 11,895 12,164 12,164 12,164 12,164 12,164 12,164 8,565 Revenue and cost of sales include mobile devices as well as other brands and the company's own as well as SIM cards. However, IFA does not estimate the earnings in this segment since it is the sale of equipment is mostly used as promotion and marketing tools to support the sales rather than making profit. Moreover, the operating result of this segment are not significant gains or losses. The cost of providing the services - Direct costs of providing services includes the rental of the telecommunications tower paid to DIF, mobile phone network, the net cost of services under the contract with CAT, roaming cost, the phone number fee, contents expenses and etc. IFA assumed that it will be equal to % of revenues from mobile phone services throughout the projection period based on the historical ratio between the years of of mobile phone services business. - Amortization cost of 1800 MHz and 900 MHz Spectrum License. IFA assumed that the amortization is straight-line basis over the period of license according to the accounting standard of the TUC. The 1800 MHz spectrum license, effectively from 4 December 2015, in the projection, IFA will incorporate the amortization in the year ended of 2015 with 2016 and will be amortized until 15 September 2033, which is the expiry date 1800 MHz Spectrum License. While the amortization of 900 MHz Spectrum License will start from 10 March 2016 (The date that IFA expects that TUC is expected to received 900 MHz Spectrum License) throughout a period of 15 years as the period of license. Wealthiest Advisory Co., Ltd Page 52

56 - The funds allocated to BTFP for public interest. IFA assumed that it is 3.75% of the revenue from mobile phone service (excluding IC revenue) as the relating regulation announced by NBTC. - Annual License Fee to NBTC. IFA assumed that it is 1.50% of total revenue from mobile phone industry as the relating regulation announced by NBTC. The projected cost of providing service for each year of service can be summarized as follows: Cost of providing services (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Direct cost of providing service 23,448 26,069 27,604 29,561 31,517 33,474 35,430 37,386 39,343 IC 6,699 7,630 8,281 8,868 9,455 10,042 10,629 11,216 11,803 Amortization cost MHz 2,261 2,247 2,247 2,247 2,247 2,247 2,247 2,247 2,247 Amortization cost- 900 MHz 3,827 5,087 5,087 5,087 5,087 5,087 5,087 5,087 5,087 Funds to BTFP 2,094 2,384 2,588 2,771 2,955 3,138 3,322 3,505 3,688 Annual License Fee 930 1,059 1,149 1,230 1,312 1,393 1,475 1,556 1,638 Total cost of providing services 39,258 44,475 46,956 49,764 52,572 55,380 58,189 60,997 63,805 Cost of providing services (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Direct cost of providing service 41,299 43,256 44,234 44,234 44,234 44,234 44,234 44,234 31,145 IC 12,390 12,977 13,270 13,270 13,270 13,270 13,270 13,270 9,344 Amortization cost MHz 2,247 2,247 2,247 2,247 2,247 2,247 2,247 2,247 1,582 Amortization cost- 900 MHz 5,087 5,087 5,087 5,087 5,087 5,087 1, Funds to BTFP 3,872 4,055 4,147 4,147 4,147 4,147 4,147 4,147 2,920 Annual License Fee 1,719 1,801 1,841 1,841 1,841 1,841 1,841 1,841 1,296 Total cost of providing services 66,613 69,421 70,825 70,825 70,825 70,825 66,999 65,739 46,287 Selling and administrative expenses - Personnel and administrative expenses include salaries, bonuses, travel and welfare of employees. IFA assumes that in 2016, the costs will grow about 5% from 2015 and will growth at 5% over the projections according to the historical growth rate of this expense during Marketing expense Include the cost of advertising, marketing campaign, PR, the discount of mobile phone accessories and other benefits to the users. IFA assumes that in 2016, this cost is about 13% of revenues from mobile phone services which in line with the proportion of the year After 2017 onwards, IFA assumes that it will be equal to 9% of revenues from mobile phone services according to the plan of the Company. - Expenses associated with the office includes the cost of the computer system, cost of utilities, equipment, cost of repair and maintenance the offices. IFA assumes that in 2016, this cost is about 4% percent of revenues from mobile phone services which in line with the proportion of the year 2015 and will Wealthiest Advisory Co., Ltd Page 53

57 growth at 2.5% over the projection period, based on the 10 years historical inflation rate ( ) from BOT. - Provision for bad debts, IFA assumes approximately 0.25% of revenues from mobile phone services throughout the projection period which is similar proportion to Bank fees, The LG fee for 1800 MHz and 900 MHz Spectrum License has the front-end of 1% of total LG and maintenance fee for LG is 1% percent per annum of the amount LG, projected based on the current LG which TUC received from the bank. The projected selling and administrative expenses for each projected year are as follows Selling and administrative expenses (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Personnel and administrative expenses 6,435 6,756 7,094 7,449 7,821 8,212 8,623 9,054 9,507 Marketing expense 7,258 5,722 6,211 6,651 7,091 7,532 7,972 8,412 8,852 Expenses associated with the office 2,233 2,289 2,346 2,405 2,465 2,527 2,590 2,654 2,721 Provision for bad debts Bank fees-lg 1, Total Selling and administrative expenses 17,968 15,862 16,619 17,343 17,715 18,480 19,406 20,354 21,326 Selling and administrative expenses (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Personnel and administrative expenses 9,982 10,481 11,005 11,556 12,134 12,740 13,377 14,046 10,384 Marketing expense 9,292 9,733 9,953 9,953 9,953 9,953 9,953 9,953 7,008 Expenses associated with the office 2,789 2,859 2,930 3,003 3,078 3,155 3,234 3,315 2,393 Provision for bad debts Bank fees-lg Total Selling and administrative expenses 22,322 23,343 24,165 24,788 25,441 26,125 26,840 27,590 19,979 Tax The corporate tax rate is 20% throughout the forecast period. Wealthiest Advisory Co., Ltd Page 54

58 License Fee 1800 MHz Spectrum License 1 st Installment Pay the auction fee at 50% of total auction fee (19,896 million baht) and submit a letter of bank guarantee (LG) for the remaining amount of auction fee (19,896 million baht) within 90 days after receiving the official notification of auction result (already paid on 25 November 2015) 2 nd Installment Pay 25% of total auction fee (9,948 million baht) and submit a letter of bank guarantee (LG) for the remaining 3 rd installment (9,948 million baht) within 15 days after a lapse of 2 years from the date of obtaining the License (December 2017) 3 rd Installment Pay 25% of total auction fee (9,948 million baht) within 15 days after a lapse of 3 years from the date of obtaining the License (December 2018) 900 MHz Spectrum License 1 st Installment Pay the auction fee of 8,040 million baht and submit a letter of bank guarantee (LG) for the remaining amount of auction fee (68,258 million baht) within 90 days after receiving the official notification of auction result (March 2016) 2 nd Installment Pay the auction fee of 4,020 million baht and submit a letter of bank guarantee (LG) for the remaining 3 rd and 4 th installment (64,238 million baht) within 15 days after a lapse of 2 years from the date of obtaining the License (March 2018) 3 rd Installment Pay the auction fee of 4,020 million baht and submit a letter of bank guarantee (LG) for the remaining 4 th installment (60,218 million baht) within 15 days after a lapse of 3 years from the date of obtaining the License (March 2019) 4 th Installment Pay the remaining auction fee of 60,218 million baht within 15 days after a lapse of 4 years from the date of obtaining the License (March 2020) The IFA projections has taken the fee of 1800 MHz Spectrum License which paid on 25 November 2015 to the projection in the year of 2016 to reflect actual costs and cash flow of the project. The cash outflow for the 1800 MHz and 900 MHz are summarized below. License Fee (million baht) 2016F 2017F 2018F 2019F 2020F รวม 1800 MHz Spectrum License (Already paid in 2015) 19, MHz Spectrum License - 9,948 9, , MHz Spectrum License 8,040-4,020 4,020 60,218 76,298 Total 27,936 9,948 13,968 4,020 60, ,090 consist of; Capital Expenditure; CAPEX The Company's investment budget for this project is estimated at 51,600 million baht which Wealthiest Advisory Co., Ltd Page 55

59 - Investment in the build and installation of the stations for the 900 MHz and 1800 MH spectrum the estimated investment is 33,400 million baht. - Investment in the expansion of the transmission system to support the 900 MHz and 1800 MHz of about 15,500 million baht. - Investment in the exchange system of 2,700 million baht According to information received from the company, it has found that the above investments will be invested in 2016 to support the service by 4G LTE technology and will be gradually paid during the years 2016 to 2021 according to an agreement made with Suppliers. Also, there is general investment for annual maintenance and improve the performance of about 6,000-8,000 million baht per year, which also have the payment terms with Suppliers. The summary of the investment (CAPEX) and cash outflows on CAPEX for each year estimated are as follows: The summarized of investment (CAPEX) over the projection period (2016F-2030F) (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F-2030F Total Major 51,600 investment 51, General 6,000 86,686 investment - 6,849 6,238 7,528 5,469 6,603 (per year) Total 51,600 6,849 6,238 7,528 5,469 6,603 54, ,286 The summarized of Cash outflows on CAPEX over the projection period (2016F-2030F) (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F-2033F Total Major investment 20,000 5,000 7,000 7,000 7,000 5,600-51,600 General 2,654 3,081 4,451 4,624 5,886 2,200-6,300 86,686 investment - (per year) Total 20,000 7,654 10,081 11,451 11,624 11,486 65, ,286 The preparation of projections assets resulting from the above investments are approximately amortized over 18 years of the Project lifetime. The accounting standard of the TUC, the mobile network equipment are depreciated about years. Working Capital IFA assumes the policy of working capital in the mobile business, the trade receivables of approximately 25 days and trade payables of approximately 40 days. Wealthiest Advisory Co., Ltd Page 56

60 Discount Rate In order to calculate present value, the IFA utilized the a discount rate as the Weighted Average Cost of Capital ( WACC ) based on the capital structure of the Company, which is from the weighted average of Kd and Ke of the Company. IFA has considered the appropriate of the value of investment in the Project in conservative basis. Details of the WACC calculation are WACC = [Ke*E/(D+E) + Kd*(1-T)*D/(D+E)] Where Ke = Cost of equity or shareholders required rate of return Kd = Average cost of debt or loan interest rate (Approximately 4% per annum, which is the average interest rate of short-term bonds and long-term estimates, which is 3.42% and the interest rate on short-term loans from financial institutions, approximately 6.53% (MLR) as of December The Company uses the proportion of loans from the bonds about 80% of total loans) T = Corporate tax rate (20%) E = Total shareholders equity D = Interest bearing debt IFA determined the cost of equity (Ke) by adopting the Capital Asset Pricing Model (CAPM) theory Ke = Rf + ß(Rm - Rf) Where Risk Free Rate (Rf): Beta (ß): Based on the rate of return of a 20-year government bond (The period coincided with the age projections), the rate was 2.80% per year as of 15 February 2016 (data from Thai Bond Market Association) time, referred from Unlevered Beta of the Company (the average of the past three years until 15 February 2016) and adjusted by the ratio of interest bearing debt to equity of shareholders of the Company after adjusting the impact of the capital increase which is expected to occur as the Company disclosed to the Stock Exchange on 1 February 2016 and the investment in this project) Rm: The approximately 20-year average rate of return on the investment in the Stock Exchange of Thailand (SET) (The period coincided with the age projections) during 1997 Janruary 2016, equals to 12.15% per year (source: the Stock Exchange of Thailand). Ke = 2.80% X (12.15% %) =16.83% Wealthiest Advisory Co., Ltd Page 57

61 Therefore, WACC = [16.83% X 62.5% % X (1-20%) X 37.5%] = 11.72% Terminal Value No terminal value after the end of projection Based on data and assumptions given above, the Free Cash Flow to Firm; FCFF are expected to occur in the mobile phone services business as follows. (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Total revenue from providing services 61,969 70,577 76,602 82,031 87,460 92,889 98, , ,176 Total cost of providing services (42,125) (47,722) (50,550) (53,776) (56,888) (60,063) (63,205) (66,346) (69,488) Gross Profit 19,845 22,855 26,052 28,255 30,572 32,826 35,114 37,401 39,689 Total Selling and administrative expenses (17,968) (15,862) (16,619) (17,343) (17,715) (18,480) (19,406) (20,354) (21,326) EBIT 1,877 6,993 9,434 10,912 12,857 14,346 15,708 17,047 18,363 EBIT after tax 1,501 5,594 7,547 8,729 10,285 11,477 12,566 13,638 14,690 Add Depreciation and Amortization 8,954 10,580 10,927 11,345 11,649 12,016 12,349 12,683 13,016 Less License Fee (27,936) 1 (9,948) (13,968) (4,020) (60,218) Less Capital Expenditure (20,000) (7,654) (10,081) (11,451) (11,624) (11,486) (6,318) (6,243) (6,176) Add Working Capital 1, ,006 1,048 Free Cash Flow to the Project (36,121) (453) (4,659) 5,536 (48,999) 12,936 19,563 21,083 22,579 Less Book value of existing spectrum (10,689) Present value of the Project (46,809) (406) (3,733) 3,970 (31,458) 7,434 10,064 9,708 9,306 Note 1. Includes the 1 st installment payment for 1800 MHz spectrum license which has been paid on 25 November 2015 (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Total revenue from providing services 114, , , , , , , ,749 86,429 Total cost of providing services (72,629) (75,771) (77,508) (77,841) (78,175) (78,508) (74,682) (73,421) (53,970) Gross Profit 41,976 44,264 45,241 44,908 44,574 44,241 48,067 49,327 32,459 Total Selling and administrative expenses (22,322) (23,343) (24,165) (24,788) (25,441) (26,125) (26,840) (27,590) (19,979) EBIT 19,655 20,921 21,076 20,119 19,133 18,116 21,227 21,737 12,479 EBIT after tax 15,724 16,737 16,861 16,096 15,307 14,493 16,982 17,390 9,983 Add Depreciation and Amortization 13,349 13,683 14,016 14,349 14,683 15,016 11,189 9,929 9,265 Less License Fee Less Capital Expenditure (6,024) (6,065) (6,000) (6,000) (6,000) (6,000) (3,674) (3,093) (2,279) Add Working Capital 1,093 1,141 1,199 1,267 1,339 1,414 1,492 1,574 1,169 Free Cash Flow to the Project 24,142 25,495 26,076 25,712 25,328 24,922 25,988 25,800 18,138 Present value of the Project 8,907 8,420 7,709 6,804 6,000 5,284 4,933 4,383 2,758 Wealthiest Advisory Co., Ltd Page 58

62 IFA also conducts scenarios using the Sensitivity Analysis by adjusting certain factors yield significant effects to the valuation. - Adjust number of new subscribers for both Prepaid and Postpaid by increasing/decreasing 5%, while others held constant. The assumption is based on 1. the average growth rate for both types of subscriber, for the projection period, is 3.4% and 2. A growth rate of Postpaid subscribers reported in the range of 3%-8%, QoQ, in Thus, scenarios of an increase/ a decrease of 5% in subscribers for both type of customers are appropriate ranges for valuation. - Adjust ARPU of Prepaid and Postpaid by increasing/decreasing 2.5% from the base case, while hold others constant. The assumption is based on a fluctuation of Postpaid subscribers rate in the range of 3%-5%, QoQ, in We deems an increase/ a decrease of 2.5% in subscriber for both type of customers are an appropriate ranges to depict the deviation of the valuation. - Adjust WACC by +/- 0.5 % from the base case (11.72%), while others held constant. IFA assesses 2 variables, constituting WACC, by 1. Restructuring Costs of Debt(Kd) by assuming bank loans at the rate of 6.5% MLR, instead of debt instrument issuance at the cost of 4%. 2. Adding a standard deviation of 0.62 (Nov Feb. 2015) to the return of 20-year-Government bond for the calculation of Cost of Equity(Ke). Putting 2 factors together, the calculation of WACC yields volatility in the range of -0.2 % % from the base case. However, in practicality, cost of debt issuance is lower than loan borrowings, thus more likely. By solely adjusting Cost of Equity, the result is +/-0.2% deviated from the base value of WACC. We, therefore, add an appropriate range of +/- 0.5 % for a boarder picture of the valuation. Wealthiest Advisory Co., Ltd Page 59

63 Summarized evaluation of the return on investment the case of Based on the Assumption of the above financial projections to estimate future cash flows which is expected to be received in future from the investment in the Project, the expected returns can be summarized to be as follows. - Net Present Value; NPV = 13,274 million baht - Internal Rate of Return; IRR = 13.83% per year - Payback Period= 8.8 years From the above returns show that the project is feasible which gives the IRR about 13.83% per year, higher than WACC of the project and it is expected to have a payback period of 8.8 years under the financial assumptions as identified above. Moreover, IFA also prepares the Sensitivity Analysis by changing the assumption to have significant change to the return on the Project which are The number of subscribers is expected to increase every year. IFA assumed to growth rate to decrease and increase by 5% per year from the previous assumption while all other assumptions constant. ARPU for each year. IFA assumed to growth rate to decrease and increase by 2.5% per year from the previous assumption while all other assumptions constant. WACC increase and decrease by 0.5% from previous WACC while all other assumptions constant Payback Period Factors Range NPV (million baht) IRR (%/year) (year) 1. Number of Subscribers +/- 5% 8,644-17, ARPU +/- 2.5% 7,676-18, WACC +/- 0.5% 9,832-16, * 8.8* Note:*IRR and Payback Period WACC calculating by considering the expected cash flows expected to be derived from the project, not calculate by using WACC. Therefore, IRR and Payback Period do not fluctuate due to changes in WACC. The results of the sensitivity analysis above, the investment in 1800 MHz and 900 MHz Spectrum License for telecommunications found that the business of providing mobile services has NPV between 7,676-18,872 million baht, IRR is between 12.94% to 14.73% per year, which is higher than the WACC of 11.72% percent, with a payback period of about 8.5 to 9.1 years. Wealthiest Advisory Co., Ltd Page 60

64 The Projection of Cash flow and the sufficiency of source of funds in case of (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Net cash from operating activities 11,218 15,192 17,746 19,412 20,497 21,459 23,331 25,314 27,378 Net cash from investing activities (28,040) (17,602) (24,049) (15,471) (71,842) (11,486) (6,318) (6,243) (6,176) Net cash from financing activities 20,000-4,500 (4,000) 50,000 (10,000) (17,000) (19,000) (23,183) Net cash 3,178 (2,411) (1,803) (59) (1,345) (27) (1,981) Beginning cash 5,376 8,554 6,143 4,340 4,281 2,936 2,909 2,922 2,993 Ending cash 8,554 6,143 4,340 4,281 2,936 2,909 2,922 2,993 1,012 (million baht) 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F Net cash from operating activities 29,118 30,467 30,935 30,513 30,061 29,584 28,249 27,401 18,843 Net cash from investing activities (6,024) (6,065) (6,000) (6,000) (6,000) (6,000) (3,674) (3,093) (2,279) Net cash from financing activities Net cash 23,094 24,402 24,935 24,513 24,061 23,584 24,575 24,308 16,564 Beginning cash 1,012 24,106 48,507 73,442 97, , , , ,483 Ending cash 24,106 48,507 73,442 97, , , , , ,047 Note: The IFA projections assume the TUC does not pays dividends to illustrate the real impact of this transaction on liquidity. The estimated cash flows of TUC in the case of 4.2.1, is expected that TUC tends to demand more funds rather than the capital increase in the year 2016 until 2020, which is the year the demand for highest additional funds of up to about 50,000 million baht, a year of paying the final installment for 900 MHz Spectrum License, which makes TUC has estimated the total debt at the end of 2020 about 69,183 million baht and expected to be fully paid in the year 2024, IFA assumed the cost of debt at the average of 4% per year. Cumulative loan (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Estimated Loan 18,683 18,683 23,183 19,183 69,183 59,183 42,183 23,183 - Interest Payment ,767 2,567 2,027 1, However, considering the ability to leverage in the Company s Group in the past, which has been borrowing more than 95,000 million baht, while the proportion of the shareholders' equity at that time is the lower proportion than the shareholders at the moment. In addition, the capital increase is expected to occur in 2016 will make the company even has the potential to borrow more to maintain the ratio of net debt to EBITDA under the condition of the financial institutions. However, in the case of raising capital in the future, the company has the option of borrowing from financial institutions, or issuing bonds, depended on the rate of interest at that time. Wealthiest Advisory Co., Ltd Page 61

65 Loans of the Group of the Company during Source: Form 56-1 Wealthiest Advisory Co., Ltd Page 62

66 4.2.2 The Feasibility Analysis of Mobile Phone Service Business in case that the Company does not obtain the 1800 MHz and 900 MHz Spectrum License In this case, IFA conducts the feasibility analysis of the mobile phone business by assuming that the Company does not obtain the 1800 MHz and 900 MHz Spectrum License and operating business by using existing spectrum (850 MHz and 2100 MHz), the assumptions differ from case (1) as follows: Projection period IFA assumed that the revenue recognized from 1 January December 2027, or about 11 years and 11 months, as the longest age of the license in this case (2100 MHz), and does not calculate the Terminal Value at the end of projections. Revenue from mobile phone service - Number of Prepaid subscribers IFA assumes that the number of Prepaid on the starting date of projection is approximately 14.4 million subscribers same as case (1), and will be new customers about 0.25 million subscribers during and there will be no growth after 2570 (the number of subscribers is stable), which is the year that 2100 MHz Spectrum License expire. Moreover, IFA does not projections the number of new customers who are expected to increase from the customer base of 900 MHz of a former operator. From the assumption above, the summarized of subscribers and revenue from Prepaid are as follows Prepaid 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Number of subscribers at the beginning (million subscribers) Increasing number of subscribers during the period (million subscribers) Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Prepaid (million baht) 19,347 19,680 20,013 20,346 20,679 21,012 21,345 21,678 22,011 22,344 22,677 21,575 Wealthiest Advisory Co., Ltd Page 63

67 - Number of Postpaid subscribers IFA assumes that the number of Prepaid on the starting date of projection is approximately 4.7 million subscribers same as case (1), and will be new customers about 0.5 million subscribers during and there will be no growth after 2570 (the number of subscribers is stable), which is the year that 2100 MHz Spectrum License expire (last year of projection) Postpaid 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Number of subscribers at the beginning (million subscribers) Increasing number of subscribers during the period (million subscribers) Number of subscribers at the end (million subscribers) Average Number of subscribers (million subscribers) ARPU (baht/subscriber/month) Revenue from Prepaid (million baht) 29,819 32,831 35,843 38,855 41,867 44,879 47,891 50,903 53,915 56,927 59,939 58,031 Bandwidth/subscriber (Hz/unit) of Prepaid and Postpaid Bandwidth per Subscriber(Hz/Number) F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Note: Spectrum License of 850 MHz expire on 3/8/2025 and 2100 MHz Spectrum License of 850 MHz expire on 6/10/2027 Capital Expenditure; CAPEX In case, the company does not have 900 MH Spectrum License, a low frequency spectrum, which can transmit wider, the company is expected to require an additional investment of about 45,000 million baht due to network investment and telecom towers of approximately 10,000 towers. The average cost of tower is Wealthiest Advisory Co., Ltd Page 64

68 about 4.5 million baht/tower (Expense of building telecom towers, the cost of installing the equipment and the cost of creating a media system to connect to the exchange stations). According to the information above, IFA estimated the major investment of 96,600 million baht and the general investment for annual maintenance and improve the performance of about 6,000-8,000 million baht per year. The summary of the investment (CAPEX) and cash outflows on CAPEX and term payment with Suppliers for each year estimated are as follows: The summarized of investment (CAPEX) over the projection period (2016F-2030F) (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F-2026F Total Major investment 51, ,600 Additional: Major investment 45, ,000 General investment - 6,849 6,238 7,528 5,469 6,603 6,000 (per year) 62,686 Total 96,600 6,849 6,238 7,528 5,469 6,603 30, ,286 The summarized of Cash outflows on CAPEX over the projection period (2016F-2030F) (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F-2030F รวม Major investment 20,000 5,000 7,000 7,000 7,000 5,600-51,600 Additional: Major 17,442 4,360 6,105 6,105 6,105 4,884-45,000 investment General investment - 2,654 3,081 4,451 4,624 5,886 3,600-6,300 62,686 (per year) Total 37,442 12,015 16,186 17,556 17,729 16,369 41, ,286 From the different assumptions between the case of (4.2.2) and (4.2.1), IFA Summarized cash flows which are expected to occur in mobile phone service business in the case of the company operates its mobile services on the existing spectrum (4.2.2) are as follows. (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Total revenue from providing services 58,667 62,659 66,650 70,642 74,633 78,625 82,616 86,607 90,599 Total cost of providing services (36,770) (38,722) (40,569) (43,051) (45,420) (47,851) (50,249) (52,647) (55,045) Gross Profit 21,898 23,937 26,082 27,590 29,213 30,773 32,367 33,960 35,554 Total Selling and administrative expenses (17,455) (15,080) (15,665) (16,266) (16,515) (17,156) (17,959) (18,785) (19,633) EBIT 4,443 8,857 10,417 11,324 12,698 13,617 14,407 15,176 15,921 EBIT after tax 3,554 7,085 8,334 9,059 10,158 10,893 11,526 12,141 12,737 Add Depreciation and Amortization 5,367 5,747 6,094 6,512 6,816 7,183 7,516 7,849 8,183 Less License Fee Less Capital Expenditure (37,442) (12,015) (16,186) (17,556) (17,729) (16,369) (6,318) (6,243) (6,176) Wealthiest Advisory Co., Ltd Page 65

69 (million baht) 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F Add Working Capital 1, ,036 1,082 Free Cash Flow to the Project (27,185) 1,792 (829) (1,036) 174 2,658 13,716 14,783 15,826 Less Book value of existing spectrum (10,689) Present value of the Project (37,874) 1,604 (664) (743) 112 1,528 7,056 6,807 6,523 (million baht) 2025F 2026F 2027F Total revenue from providing services 94,590 98,582 94,990 Total cost of providing services (57,443) (59,841) (57,491) Gross Profit 37,147 38,741 37,498 Total Selling and administrative expenses (20,505) (21,403) (20,930) EBIT 16,642 17,338 16,569 EBIT after tax 13,314 13,870 13,255 Add Depreciation and Amortization 8,516 8,849 8,358 Less License Fee Less Capital Expenditure (6,024) (6,065) (3,674) Add Working Capital 1,130 1,181 1,172 Free Cash Flow to the Project 16,936 17,836 19,110 Less Book value of existing spectrum Present value of the Project 6,249 5,890 5,650 Wealthiest Advisory Co., Ltd Page 66

70 Summarized evaluation of the return on investment the case of Based on the Assumption of the above financial projections to estimate future cash flows which is expected to be received in future from the investment in the Project, the expected returns can be summarized to be as follows. - Net Present Value; NPV = 2,137 million baht - Internal Rate of Return; IRR = % per year - Payback Period= 7.4 years From the above returns show that in the case of (4.2.2) is also feasible which gives the IRR about 12.47% per year, higher than WACC of the project and it is expected to have a payback period of 7.4 years under the financial assumptions that differ from the case of (4.2.1) as identified above. However, considering the return of the case (4.2.1) and (4.2.2), it has found that the use of 1800 MHz and 900 MHz Spectrum License with the existing spectrum 850 MHz and 2100MHz can generate better returns in terms of NPV and IRR than in the case that the Company does not obtain the license. The main cause are; the number of subscribers who using the service are expected to increase and the longer time period to generate a return over time due to the longer remaining period of the license. As well as the value of investment in network expansion which decreased by approximately 45,000 million baht from the characteristics of 900 MHz spectrum, which has the wider signal so that it can reduce total investment in the network stations about 10,000 stations. Summary of the Return of 2 Cases Case NPV (million baht) IRR (%/year) Case Obtaining 1800 MHz and 900 MHz Spectrum License 13, Case Without 1800 MHz and 900 MHz Spectrum License 2, Therefore, The IFA s opinion is that the investment in project of Spectrum License of 1800 MHz and 900 MHz for the telecommunication business which has the total investment of 167,690 million baht is the reasonable transaction and the shareholders should vote in favor of approving the transaction. Nevertheless, the valuation of the value of Spectrum License of 1800 MHz and 900 MHz is not exact value, caused by the restrictions on the use of frequencies that are used together with other providers to provide mobile services. However, investment in this project can bring benefits to the company's mobile business as well as the increasing of power of the Company s competitiveness, better performance of service, increase opportunities to reach new customers, reducing the risk of license auction in the future, which is also uncertain schedule. Moreover, the way to get two spectrum licenses through an auction organized by the NBTC, which is a government agency, IFA has seen that it is fair and transparent. The value the winning auction for license of each bidder is not significantly different from the other bidders. Therefore, IFA believes that investment in the project is appropriate. However, IFA has conducted feasibility analysis by considering the past financial information of the Company, operating result of mobile phone service business during The main assumptions which Wealthiest Advisory Co., Ltd Page 67

71 are prepared by management of the Company and TUC and are under the current mobile phone service industry and current economic situation. Therefore, any changes regarding business plans and policies of the company or any changes in an industry conditions or economic changes could significantly impact the business operations and financial projections which has been prepared under the assumptions above, may affect the feasibility analysis of the project. Wealthiest Advisory Co., Ltd Page 68

72 Part. 5Conclusion of the IFA s opinion After the Consideration of the information above, IFA s opinion is that the investment in project of Spectrum License of 1800 MHz and 900 MHz for the telecommunication business and the investment in relating matter of the total value of investment of 167,690 million baht is the reasonable transaction and the has sufficient funds and shareholders should vote in favor of approving the Transaction. In case of the reasonable of price, IFA has conducted feasibility analysis by considering the past financial information of the Company, operating result of mobile phone service business during The main assumptions of the feasibility analysis are arise from the information received from the Company and current economic situation. In conclusion, the investment in the project of 1800 MHz and 900 MHz Spectrum License for telecommunication business could give the return in the form of NPV and IRR. The base case basis is better than the case that the Company did not get the license. After considering Sensitivity analysis, IFA has found that the mobile phone service business of the Company has NPV between 7,676-18,872 million baht, IRR in the range of 12.94%-14.73% per year which is higher than WACC of the Company of 11.72, and the payback period around years. Nevertheless, the valuation of the value of Spectrum License of 1800 MHz and 900 MHz is not exact value, caused by the restrictions on the use of frequencies that are used together with other providers to provide mobile services. However, investment in this project can bring Synergy benefits to the company's mobile business as well as the increasing of power of the Company s competitiveness, better performance of service, increase opportunities to reach new customers, reducing the risk of license auction in the future, which is also uncertain schedule. Moreover, the way to get two Spectrum Licenses through an auction organized by the NBTC, which is a government agency, IFA has seen that it is fair and transparent. The value the winning auction for license of each bidder is not very different from the other bidders significantly. Therefore, IFA believes that investment in the project is appropriate. IFA also consider factors that might be affected the transaction including: (1) The project requires high cost of investment might make the company lack of liquidity. (2) The increase of amortization expense of license may adversely affect the Company's income statement. (3) The increase of costs related to the license fee (4) The Company will have fee regarding to loans, an increase of interest expense, and higher ratio of interest bearing debt to shareholders equity. (5) The risk of the mobile phone service industry which has high penetration rate and negligible growth. (6) The risk of the competition in the mobile phone service industry from the new provider. (7) The risk of the value of the auction license which may drop in the future. Nevertheless, the final decision rests primarily with the individual shareholders. The shareholders should study the information contained in this report along with other related information provided and use his/her own judgment in making the final decision carefully. Wealthiest Advisory Co., Ltd Page 69

73 IFA hereby certify that the report was prepared prudently and in line with professional practice with due regard to the interest of the shareholders. Yours sincerely, Wealthiest Advisory Co.,Ltd (Akawat Chongsakul) Operation Controller (Akawat Chongsakul) Managing Director Wealthiest Advisory Co., Ltd Page 70