contents
Vision & Mission 1
Message from Chairman and CEO 2
Board of Directors 4
Corporate Governance 6
Organization Chart 10
Executive Management 12 Annual R
Highlight in 2001 14 epor
t 200 Operational Review 15 1 T
o Key Figures 17 t al A ccess Communication Public Com Financial Review 18
Risk Factors 22
Wireless Industry in Thailand 24
The DTAC Story 26
pan DTAC and the Community 34 y Limit
Shareholder Structure 36 ed
Information for Shareholders 40
Directors Report 41
Audit Committee Report 44
Financial Statements 45
Total Access Communication Plc. 2001 annual report 333/3 Chai Building, Vibhavadi Rangsit Road, Chatuchak, Bangkok 10900 Tel. 0-266-2202-8000 Fax: 0-266-2202-8102-4 www.DTAC.co.th 1 t 200 epor Vision & Mission Total Access Communication Plc. annual r
V i s i o n
DTAC will be Thailand's telecommunications service company of choice, meeting the
needs for communication and interaction among the people, businesses and
communities that we serve.
“easy”
M i s s i o n
To be a world class telecommunication company which;
•understands customer needs and provides innovative and effective solutions on a timely basis
•provides a challenging and rewarding work environment where employees flourish
• is trusted by all our stakeholders ccess Communication Plc. al A t
o annual report 2001
T Total Access Communication Plc. 01 Message from Chairman and CEO Total Access Communication Plc. In order to support this promise, we have invested heavily in our network to significantly increase the areas of population covered throughout Thailand. We have also embarked on an ambitious in-building coverage project in Bangkok to augment the quality of our service in the Capital. If our focus is to be on Message from our Chairman and CEO meeting the needs of our customers it is necessary to have a network in place that provides them with 2001 was a transitional year for our company. The year started with the successful launch of the much- high standard service levels in the areas where they are mobile. I am happy to report that the network acclaimed brand name "DTAC". A primary purpose of this exercise was to consolidate a variety of brand roll out in 2001 was completed with spectacular success as a result of the planning and cooperation names into one. But more importantly, the new "DTAC" was to herald a new way of doing business for our between DTAC and our principal shareholders, the UCOM Group and Telenor. customers and to develop an association with the core attributes of our brand. "Make It Easy" is our guiding principal in developing a customer relationship based on trust, fairness and transparency which Delivering quality service at a reasonable price requires that we work smarter. In 2001 we worked on a together represent the promise of "DTAC". number of areas to improve the efficiency in our key business processes and our overall productivity. In particular, recognizing the value of our employees, we enhanced training programs in a number of disciplines and are in the process of implementing and integrated HR program that includes a performance-based reward and recognition system.
Year 2002 will be a very dynamic year for the wireless telecommunication industry in Thailand and will present challenges to the players in it. Intensified competition, the possibility of regulatory changes and domestic economic pressures all need to be included in our plans. However, given the foundation that we have built over the past few years, I am confident that DTAC now has the approach, infrastructure, people and customers to take on these challenges and continue to succeed.
Our vision is to be Thailand's telecommunications service company of choice, meeting the needs for communication and interaction among the people, businesses and communities that we serve. This requires that we continue to work diligently to sustain growth in our customer base, controlling costs, developing our products and services and keeping our customers satisfied. In this way we will build an organization that enhances all of our stakeholders values.
Finally, I would like to take this opportunity to thank all our shareholders for their continued supports and confidence in our company.
Mr. Boonchai Bencharongkul Chairman and Chief Executive Officer
annual report 2001 annual report 2001 02 Total Access Communication Plc. Total Access Communication Plc. 03 Board ofDirTotal Accessectors Communication Plc
Mr. Boonchai Bencharongkul Chairman of Board of Directors and Chief Executive Officer, Total Access Communication Plc. 1984 - 2000 Chief Executive Officer, United Communication Industry Plc.
Mr. Somlak Sachjapinan Mr. Pakkaporn Sathienpakiranakorn Deputy of Board of Directors Director, Total Access Communication Plc. and Chief of Engineering Steering Committee, 1994 - present Executive Vice President Total Access Communication Plc. (Telecommunications services), The Communications 1986 - 1991 Senior Executive Vice President, Authority of Thailand The Communications Authority of Thailand 1999 - 2001 Cheif Executive Officer, Total Access Communication Plc.
Mr. Vichai Bencharongkul Mrs. Tasanee Manorot Director, Total Access Communication Plc. Director, Total Access Communication Plc. 2000 - present Chairman of Board of Directors present Senior Executive Vice President (Finance), and Chief Executive Officer, Telephone Organization of Thailand United Communication Industry Plc.
M.R. Tongnoi Tongyai Mr. Arve Johansen Director, Total Access Communication Plc. Director, Total Access Communication Plc. 2001- present Personal Counselor to HRH the Crown Prince 1999 - present Senior Executive Vice President Present Chairman and Audit Committees, Telenor AS and Chief Executive Telenor Mobile Total Access Communication Plc. Communications
Mr. Chulchit Bunyaketu Mr. Sigve Brekke
Director, Total Access Communication Plc. Deputy of Board of Directors, 1998 - present Managing Director, Total Access Communication Plc. Thai Oil Company Limited. 2000 - present Managing Director, Telenor Asia Pte. Ltd.
Mr. Soonthorn Pokachaiyapat Mr. Bjorn Magnus Kopperud Director, Total Access Communication Plc. Director, Total Access Communication Plc. 1974 - present Head of Chaiyapat Law Office 2000 - present Executive President, Telenor Mobile Communication AS
annual report 2001 annual report 2001 04 Total Access Communication Plc. Total Access Communication Plc. 05 Corporate
Corporate Governance Total Access Communication Plc. 1. Management
Management Structure Independent Directors
The Company's central management structure consists of the Board of Directors, the Board of The Company has three independent directors; all are non-executive and carry out the functions Management and the Audit Committee. The Board of Directors is responsible for setting overall policies independently of the executive directors and management of the Company. They are and strategies. The Chief Executive Officer ("CEO") is responsible for the implementation of strategies in 1. MR. Tongnoi Tongyai accordance with stipulated policies. The Chief Operating Officer ("COO"), Chief Financial Officer ("CFO") 2. Mr. Chulchit Bunyaketu and Senior Group Director (Corporate) have separate areas of responsibility. These executives and other 3. Mr. Soonthorn Pokachaiyapat. senior managers form the Board of Management, while Telenor nominates the COO and CFO. The Audit Committee Board of Directors: Appointments and Withdrawals
The Audit Committee has been established under the regulations of the Stock Exchange of Singapore. It
Appointments to, and withdrawal and retirement from the Board of Directors are governed by the Gover is comprised of three independent Board members. Company's Articles of Association that require: The Committee's responsibilities are: 1. The Board of Directors must have at least 5 members and at least half of the Directors appointed 1. Financial Reporting and Auditing must have permanent residence in Thailand. a) Examine the Company's financial statement and accounts. 2. The shareholders appoint the members of the Board: b) Consult with the independent auditor as necessary. a) Voting is in proportion to the number of shares held. c) Make recommendations concerning the appointment of the independent auditor. b) Votes can be for one or a group of nominees but votes cannot be split between a number of d) Present the Audit Committee's Report, signed by the Chairman of the Audit Committee, as an nominees. integral part of the Company's Annual Report c) Nominees with the highest number of votes are appointed. Where there is a tie, the chairman of 2. Monitoring, Supervision and Advice the meeting has the casting vote. a) Monitor the Company's business to ensure that it is in accordance with the law and regulations of the Stock Exchange of Singapore and any other relevant law. 3. A Board member wishing to resign from his position must submit a letter of resignation to the b) Making available accurate information about the company's finances in those instances where company. A resignation takes effect when the Company receives it.
nance inappropriate transactions, conflicts of interest or other anomalies occur. 4. The withdrawal of a Board member before the mandatory retirement age can be proposed at a c) Advising the Board of Directors on matters that: have an impact on the Company's financial status shareholders' meeting where at least 3/4ths of all shareholders are present and have a right to vote. and its day to day operations; involve conflicts of interest and/or corruption; relate to significant errors in the internal control system; are considered likely to be contrary to the law and regulations of At present, the Company's Board of Directors comprises of eleven members; three as independent non- the Stock Exchange of Singapore or other laws relevant to the Company's business. executive directors, three from United Communication Industry Plc. (UCOM), three from Telenor Asia Pte d) Directing and supervising the internal audit division to ensure that it operates independently and Ltd (Telenor), one from the Communication Authority of Thailand (CAT) and one from Telephone efficiently. Organization of Thailand (TOT).
annual report 2001 annual report 2001 06 Total Access Communication Plc. Total Access Communication Plc. 07
Corporate Governance
3. Internal Control 2. Business Supervision Reviewing the Company's internal control and internal audit system to ensure that they are suitable and effective. The duties and responsibilities of the Board of Directors is set out in the Company's Articles of Remuneration Association and in the regulations of the Stock Exchange of Singapore. The Board of Directors also operates under the Code of Best Practice guidelines issued by the Stock Exchange of Thailand. Supervision is carried out by the Board of Directors through the Operating Committee. The remuneration of the directors and management staffs in 2001 was:
Remuneration 2001 3. Internal Information Management 1) Board of Directors Baht 420,000.00 (for meeting attendance) The Company has established policies to prevent the manipulation and misuse of information. These 2) Thai Management Baht 40,359,194.00 policies are constantly monitored to ensure compliance by management and staff. (in aggregate)
Notes: 1) Paid to the three independent directors. Directors who are also on the Board Management do 4. Internal Control System not receive this remuneration. 2) Remuneration for Thai management includes salaries, bonuses, and allowances for vehicle The Company has established internal control systems to maintain the integrity and security of the expenses. This excludes management appointed by Telenor who are billed to the Company Company's assets and data. These internal control systems clearly define the powers and authority of under a service agreement. management with respect to the use of the Company's resources and include approval and processing controls to ensure that transactions are appropriately authorized and properly recorded and that assets and data are properly protected.
The Audit Committee regularly reviews the efficiency, sufficiency and suitability of the company's internal control systems in different areas such as: organization and environment; risk management; operational control; information technology systems; and information communication and monitoring systems. Reports are made to the Board of Directors on significant anomalies discovered and where actions are to be taken to bring about improvements and rectification.
annual report 2001 annual report 2001 08 Total Access Communication Plc. Total Access Communication Plc. 09 Board Total Access Communication Plc. of the Organization Chart Directors ...... Internal Audit ...... Committee
CEO
......
COO Sr.Group CFO Director Corporate ACFO ...... ( CHIEF OF STAFF )
......
ACOO ACOO Corporate ACFO ACFO ACFO ( Commercial Unit ) ( Operation ) Group ( Accounting ) ( Treasury ) ( Capital Market&IR )
annual report 2001 annual report 2001 10 Total Access Communication Plc. Total Access Communication Plc. 11 Executive Management Total Access Communication Plc.
Mr. Boonchai Bencharongkul 1 Chief Executive Officer and Chairman of Board of Directors, Total Access Communication Plc. 1 1984-2000 Chief Executive Officer, United Communication Industry Plc. Mr
. Boonc 9 Mr. Somlak Sachjapinan Mr
. Somkiat A Chief of Engineering Steering Committee and Deputy of Board of Directors, Total Access Communication Plc. 8 hai Benc 10 2
Ms. K 1986-1991 Senior Executive Vice President , The Communications Authority of Thailand Mr
. Pr 1999- 2001 Cheif Executive Officer, Total Access Communication Plc. ul har 5 tiyudhak emon Pinsk v adee K
Mr 3 ongk . Pitjapol Jantanasar Ms. Helene Sandber Ms. Helene Sandberg
ul 2 anjanabose 3 Chief Operating Officer, Total Access Communication Plc. 4 ul Mr Mr
6 ul 1996-1997 Business Advisor, Digifone, Ireland . Somlak Sac Mr . Grant S. F 7 1998-1999 Head of Products & Services-Marketing in Connect Austria . P Mr e
. Sa 1999- 2001 Vice President Marketing/Customer Service, Telenor Mobile AS tt er Bor w g o at Chantrasr er hjapinan guson Mr. Grant Scott Ferguson r e F Chief Financial Officer, Total Access Communication Plc. urber 4 1996-1997 Vice President, Treasury, First Pacific Company, Hong Kong g i 1998 - 1999 Director and CFO, First Pacific Company, Indonesia 1999 - 2000 Director and CFO, Metro Pacific Corporation, Philippines Mr. Pitjapol Jantanasaro 5 Senior Group Director - Corporate, Total Access Communication Plc. 1998-2000 Department Director of CSU, United Communication Industry Plc. 2000-2001 Deputy Managing Director, Total Access Communication Plc.
Mr. Petter Borre Furberg 6 Assistant Chief Financial Officer, Total Access Communication Plc. 1998-1999 Telenor International Business Controller 2000-2001 Telenor Mobile Communications, VP Finance Mr. Sawat Chantrasri 7 Assistant Chief Operating Officer- Operation, Total Access Communication Plc. 1991-2001 Deputy Managing Director, Total Access Communication Plc.
Mr. Premon Pinskul 8 Assistant Chief Financial Officer- Accounting, Total Access Communication Plc. 1999-2000 Assistant Managing Director and Department Director of CSU 2000-2001 Assistant Managing Director and Department Director of Accounting Mr. Somkiat Atiyudhakul 9 Asistant Chief Financial Officer- Treasury, Total Access Communication Plc. 1990-1991 The union Bank of Bangkok Plc.
Ms. Kulvadee Kanjanabose 10 Assistant Chief Financial Officer- Capital Market & IR, Total Access Communication Plc. 1986-1989 Senior Account officer, Commercial Credit Department Siam Commercial Bank Plc.
annual report 2001 annual report 2001 12 Total Access Communication Plc. Total Access Communication Plc. 13 Operational Review Highlight in In Conversation with Total Access Communication Plc. 20012001 Helene Sandberg, COO
With her experience and upbeat attitude Helene is a true representation of DTAC. A multi talented professional with diverse qualifications, her contribution makes her, amongst others, a voice for the new March 2001 The DTAC brand and corporate identity was introduced together with spirit of DTAC, which she claims has offered her great opportunity and much joy. Helene started working 1st a customer focused business approach that radically changed the way wireless Quarter with Telenor at the age of 16, and she is now in a home far from home, working with DTAC as Chief services are marketed in Thailand and customers expectations of service providers. Operating Officer. Before joining DTAC, she also worked with two of Telenor's international operations in
April 2001 The Telephone Authority of Thailand approved a change in the access Ireland and Austria as well as being a key member of the senior management team that brought wireless charge paid for prepaid customers from Baht 200 per month per customer to 18% of services to Telenor's home market of Norway. the value of prepaid vouchers sold. 2nd April 2001 The Company successfully issued Baht 15,000 million of amortizing "The whole exercise of re-branding TAC to DTAC was to create a much clearer Quarter bonds in the local market at a coupon rate of 5.60% per annum. These bonds will position in the marketplace, both visually and in terms of consumer benefits. mature in 2006 and were used to refinance existing debt and fund the 2001 capital However, a brand is much more than an advertising and sales campaign. The expenditure program. brand values have to be demonstrated every single day - by each and every June 2001 The Djuice Internet portal was launched as a gateway to the mobile employee. Not an easy task when a company has more than 2,500 employees, Internet utilizing WAP (Wireless Application Protocol). but achievable. Several training programs have been introduced, including the
August 2001 Moody Investor Services upgraded the Company's rating from B2 to B1 Customer Service Group in the first instance." A major independent survey 3rd September 2001 The " Dprompt" prepaid brand was repositioned in the market, carried out late 2001 showed that the efforts have already yielded results. Quarter promoting a "Be Smart" concept. This move was designed to increase the products In this survey DTAC achieved a service index score that indicates visibility in the market and differentiate it from competing products. that the Company is a market leader in this area."
October 2001 The Company signed a credit agreement with local financial institutions for a long-term facility amounting to Baht 16,000 million. This facility "Make It Easy" is more than a tag line. It is the replaced a previous facility provided to the Company in July 2000, but which had philosophy around which DTAC is now centered, explains remained unutilized. 4th Helene. "DTAC is easy to use, easy to understand and November 2001 GPRS (General Packet Radio Service) was launched. This will be Quarter easy to access. Our high quality network, our very used as a platform for advanced data services, mobile commerce and mobile simple price plans and our wide distribution and service Internet access as these products are sought by the market in Thailand. DTAC is the first nationwide GPRS network. network are all part of the brand promise to Make It December 2001 The GSM network Phase 3 expansion was completed. By end Easy. Fairness and transparency are two other key 2001 this network covered 70% of population in Thailand. attributes of the DTAC brand. Per second charging, flat rate nationwide and our "Network Quality Guarantee" are good examples of how want to be understood by our customers."
annual report 2001 annual report 2001 14 Total Access Communication Plc. Total Access Communication Plc. 15 H e "We are first and foremost a consumer services business. That requires that we understand the needs of Key Figures our customers, respond to those quickly and generally improve their overall experience of dealing with Total Access Communication Plc. DTAC. This will become increasingly important as our subscriber base grows and as competition l (Unit: Thousand Baht) intensifies. "D4U" - the first loyalty program in Thailand to be offered both prepaid and postpaid e 2001 2000 1999 customers - that we launched in 2001 is the type of program that we will continue to develop to enhance Income Statement the customer experience."
n Revenue From telephone services 22,028,477 15,865,871 12,067,507 From sales of telephone sets 7,051,841 4,920,767 3,856,908
e From sales of retail goods 439,859 469,861 457,328 Other operating income 579,355 1,607,089 1,789,877 According to Helene, DTAC now talks with confidence about the quality of its network. "Of course, Other income 85,535 442,781 139,903 without a good network our ability to deliver quality service would be impaired". I am very pleased with Total Operating Revenue 30,185,066 23,306,369 18,311,523 the network roll-out program in 2001. In the space of that S Operating Expenses one year, we have been able to expand the network from Cost of services 11,066,597 7,364,324 5,814,926 less than 1,500 base-stations to over 3,000 base-stations.
a Cost of sales of telephone sets 6,748,216 4,282,319 2,967,863 We have also installed micro-sites in an additional 295 Cost of sales of retail goods 336,564 379,906 379,533 buildings to improve the quality of in-door coverage." Selling and administrative expenses 6,786,195 4,735,857 4,026,349 n Total Operating Expenses Despite the successes in 2001, Helene refuses to allow any complacency in her thinking. "I sense the 24,937,572 16,762,406 13,188,671 Interest income coming years will be every bit as exiting and as challenging as 2001. However, with an ever-increasing 485,186 505,945 569,671 Financial cost (3,122,431) (3,269,715) (3,348,235) customer base and a broader knowledge in the market about the potential for wireless communication, d Foreign Exchange gain (loss) the challenges that we will face will be even more diverse than in the past. We will need a full 345,051 (2,697,603) (694,971) Earnings Before Income Tax understanding of the needs of both the existing and potential markets and make sure that we have 2,955,300 1,082,590 1,649,318 b Corporate income tax innovative products in the market when they are required. We also need to continuously review how we (860,339) (434,789) (352,630) Net Earnings deliver outstanding customer service in a cost effective way. This degree of understanding and service 2,094,961 647,800 1,296,688 Earnings per share (Baht) 4.42 1.50 3.30 level requires a lot of research and education. But more importantly it requires that our whole e organization is focused on satisfying customer needs and that we work across functional lines with a Balance Sheet common goal." Total assets 82,046,393 65,042,352 57,951,602 r Total long term borrowing 42,714,297 31,310,043 26,624,099 Helene is also quick to point out that while the customer is paramount, technology remains the Total liabilities 57,709,099 42,800,020 46,698,694 g foundation of the business. "We will also of course implement new technology in order to deliver the Total equity 24,337,293 22,242,332 11,252,908 products and services that our customers want. However, I firmly believe that market demand leads the Weighted average number of 474,416,126 474,416,126 404,416,126 technology choices rather than technology dictating to the market. We have a lot of creative people in the , shares (Share)
Company. Sometimes the challenge is keeping their feet on the ground", Helene adds with a wry smile. Financial Ratio C Net profit/Revenue 6.94% 2.78% 7.08% Given her international experience, how does she compare DTAC to other companies in the business? Return on equity 9.00% 3.87% 13.22% "We know that we have still got our work cut out in many areas but we have already made a lot of Return on asset 2.85% 1.05% 2.17% progress. I think the DTAC of today represents the best of Thai style and culture and international best O Earning per share 4.42 1.50 3.30 practice. We can certainly compare favorably with the best telecommunication companies in the world in Book value per share 51.30 46.88 27.83 the key business process. That's one of the reasons why I am so confident in DTAC's future." O annual report 2001 annual report 2001 16 Total Access Communication Plc. Total Access Communication Plc. 17 The Year in Review Financial Review By Grant Ferguson, CFO By Grant Ferguson, CFO
Firstly, as a result of introducing what we believe to be fairer charging principals, and the uptake of Operating Performance prepaid customer, average revenue per user (or ARPU) declined by 20% to 908 in 2001 prepaid service Creating a brand that would allow us to acquire and sustain a large and lucrative part of the allows more cost conscious consumers to better manage their expense and therefore broadens the increasingly competitive wireless telecommunications market in Thailand was potential market but generally produces a lower ARPU. key to our business strategy. The introduction of the DTAC brand in 2001 was accompanied by a dramatic change in the way we charge our customers for Secondly, as wireless services is our core business, in order to make it more accessible we have service and a significant reduction in restrictive fixed costs (such as handsets consciously set about reducing the price that our customers have to pay for handsets. As a result the and monthly fees). This new way of doing business is an integral part of average margin in this business area declined from 13% in 2000 to 4% in 2001. However, our focus will developing a brand that people understand and trust and in making service be on developing products and services in the wireless business for voice and data. Services such as affordable to a greater proportion of the residents of Thailand. text messaging are in their infancy in the Thai market but have great potential. Realizing this means
2001 Net Addtional Subscribers. minimizing obstacles to using the service, such as the cost of hardware.
220.000 220.000
200.000 200.000
180.000 180.000 Thirdly, as our future will be built around the DTAC brand, it was imperative, that we invested sufficient
160.000 160.000
140.000 140.000 resources in it upfront to achieve maximum impact in as short a time as possible. In 2001 we, therefore 100,842 111,206 120.000 102,200 102,578 102,497 99,678 120.000 105,475 101,441 102,032 The success of this approach 100.000 100.000 spent heavily in advertising and promotion to ensure that the DTAC brand was quickly recognized and 63,450 104,329 80.000 80.000 59,000 understood by the market. As a result, selling and administrative expenses increased to THB 6,786 has seen our subscriber base 60.000 60.000 increase to 2,737,598 at end 40.000 40.000 million compared to THB 4,736 Million in 2000. 20.000 20.000 2001 from 1,403,300 at end - 1 1 1 1 1 1 -20.000 01 01 -0 01 -0 01 1 -0 -0 0 01 -0 -20.000 n- d- ar r- ay n- l-0 g p ct- v- c Ja Fe M Ap M Ju Ju Au Se O No De
2000. As a result consolidated Postpaid Prepaid Cum.Ave. in 2001 Net income for the year of THB 2,095 million compares to THB 648 million in 2000. The reduction in revenues increased to THB 30,185 million in 2001 compared to THB 23,306 million in 2000. operating profit was offset by the elimination of exchange losses in the previous year and the control of financing costs.
From these revenues, we produced operating income of THB 5,247 million or 17% of revenue compared EBITDA and margin from wireless and handset businesses to THB 6,544 million or 28% of revenue in 2000. This reduction was brought about by three principal 12,000 10,305 60% factors, all of which were key to the success of our strategy. 9,150 50% t 10,000
h 8,113
a 40% Breakdown of revenue and % of total in 2001 and 2000 8,000 B 30% n 6,000 % total % o
% total i
l 20%
Operating Revenues 2000 rev. 2001 rev. chg.YoY l 4,000 i 10% Revenue from Telephone Service 15,865.87 68% 22,028.48 73% 39% M 2,000 - 0% Revenue from sales of telephone sets 4,920.77 21% 7,051.84 23% 43% Year 1999 2000 2001 Revenue from sales of retail goods 469.86 2% 439.86 1% -6% Other operating income 1,607.09 7% 579.36 2% -64% EBITDA Service Margin Handset and Retail Margin other income 442.78 2% 85.53 0% -81% Total operating revenues 23,306.37 100% 30,185.07 100% 30% annual report 2001 annual report 2001 18 Total Access Communication Plc. Total Access Communication Plc. 19 By Grant Ferguson, CFO
Financial Performance Shareholders equity increased to THB 24,337 million from THB 22,242 million at end 2000 due to the 2001 net income transferred to reserves. To ensure that the quality of service was consistent with the brand promise, we invested heavily in operating infrastructure in 2001. Capital expenditure of THB 20,000 million was the principal reason Financial Status behind a 26% increase in total assets to THB 82,046 million at end 2001. Much of the capital expenditure was incurred in an aggressive network rollout program that saw our service coverage area We have worked diligently on our balance sheet in 2001. All US Dollar debt exposure has now been fully increase from around 48% of the Thai population at the beginning of 2001 to 70% by the end of the year. hedged and in April 2001 we issued THB 15,000 million of amortizing bonds in the local market with a Telenor's involvement in this process not only contributed to the technical success of the project but also final maturity in April 2006 that were primarily used to finance debt maturities. allowed us to avail of equipment unit costs significantly lower than in previous years. The support of the UCOM Group, who was responsible for much of the installation work, was also critical to the success of In October 2001, we entered into a credit Facility Agreement with 9 local and foreign banks for THB this project 16,000 million with a final maturity in June 2006. This facility that is available until November 2002 replaced facilities in the same amount entered into in July 2000 but which had not been utilized due the
Total liabilities at end 2001 of THB 57,709 million compared to THB 42,800 million at end 2000. This availability of more cost effective funds in the local bond market. The new facility includes a provision to was primarily due to an increase in total outstanding debt obligations from THB 31,310 million at end allow up to THB 8,000 million to be replaced by Export Credit Agency (ECA) supported financing. In 2000 to 42,741 THB million at end 2001. December 2001 such an agreement was concluded with Finnvera, the Finnish ECA, for a guarantee covering US$ 120 million of loans with a final maturity in December 2009 funded by 3 international Debt profile at the end 2001 AMOUNT TOTAL banks. At the same time an equivalent proportion of the bank facility was cancelled. Facility %HEDGING MATURITY in USD in THB AMOUNT (THB) USD Debt 1.ECD1-Non Exercise 1.50 - 100% 37.94 May 31,2006 Table of principal financial ratios at the end of 2001 2.Yankee-06 300.00 - 100% 13,306.11 Nov 4,2006 (B) Total USD Debt 301.50 - 100% 13,344.05 Gross Profit Margin (%) 38.92 THB Debt 1.TAC05 OA - 6,000.00 - 6,000.00 2002-2005 (A) Current ratio (x) 1.08 2.TAC064A - 15,000.00 - 15,000.00 2003-2006 (A) Total Debt to Equity (x) 1.76 3.Baht Syndicated Facility - 6,500.00 6,500.00 2003-2006 (A) 4. 3-month B/E - 222.50 222.50 28/02/2002 (B) Total THB Debt 27,722.50 27,722.50 Total DEBT - 41,066.55 We believe that "Making It Easy" applies to every aspect of our business, including corporate governance Note : (A) = Amortized repayment (B) = Bullet repayment and investor relations. While there remains room for improvement in these areas we are in the process of
Working capital, excluding the current portion of long-term debt obligations, at end 2001 was THB 1,894 implementing reporting and information services designed to improve the awareness and transparency million compared to THB 8,908 million at end 2000 due to an increase in payables to equipment of our business strategies, goals and results. vendors deferred until the ECA facilities had been approved, increases in inventory and accounts receivable due to the scale of operations and lower cash balances due to the 2001 capital expenditure program.
annual report 2001 annual report 2001 20 Total Access Communication Plc. Total Access Communication Plc. 21 RISK FACTORS Total Access Communication Plc.
Risk factors, which may have an impact on the Company can be classified into four categories:
1. RISK FROM LEGAL ISSUES 3. RISK FROM OPERATIONS • Concession conversion •Bill collection and bad debt
Section 80 of the Telecommunications Services Act 2001 specifies that the existing telecom operators The Company's customer base comprises prepaid and postpaid customers. Postpaid customers receive will have entered into an agreement to terminate existing concession contracts prior to receiving a monthly bills subsequent to usage. The Telecommunications Services Act 2001 prohibits operators from license to operate from the National Telecommunications Commission ("NTC"). Currently the NTC has not collecting deposits from customers. The Company had already voluntarily stopped taking deposits from commenced operations and therefore details of possible licensing arrangements are not available. new subscribers but this legislation means that deposits may not be used in the future to reduce the Various concession conversion frameworks have been proposed and the Company has provided input to Company's risk of bad debt. these proposals. However, to date none of the proposals have been agreed to by Government, the Company and the Communications Authority of Thailand ("CAT"). There is no time frame for completing The Company has implemented various methods to manage this risk including setting up credit limits, this process. Concession conversion is at the discretion of the Company. If the Company chooses not to implementing a Bill Reminder System, monitoring payment trends to detect potential collection convert its concession, operations under the existing concession would continue. problems, subcontracting the collection of long overdue bills to professional agencies and taking legal action against bad debt customers and terminating relationships with dealers who may have colluded •Possible restriction of foreign shareholdings with them. A lotto program has also been introduced to encourage customers to pay by the due date.
Section 8 of the Telecommunications Services Act 2001 limits the percentage of foreign shareholdings 4. FINANCIAL RISK in telecommunication operating companies to 25 percent. This may effect existing concession operators •Exchange risk on operational transaction if the concession were to be converted into a license granted by the NTC. The Company's revenues are primarily received in Thai Baht but new investment for network equipment The Company and other operators have expressed concern about this provision and the Government has is primarily denominated in foreign currencies. The Company uses forward currency contracts to hedge publicly stated that they will seek to amend this section. However, to date that process has not been the exchange risk from current liabilities denominated in currencies other than Thai Baht. However, there completed. remains the possibility of exchange losses arising on these transactions. 2. RISKS FROM MARKETS AND COMPETITION • Financial instruments used in risk management •New operators In order to secure optimal financing terms, the Company may enter in debt instruments denominated in Three new operators may commence offering service to the wireless sector in 2002, namely TA Orange a foreign currency. It is the Company's policy to exchange resulting foreign currency liabilities into Thai Co., Ltd., ACT Mobile Co., Ltd. (a joint venture between The Telephone Organization of Thailand ("TOT"), Baht. Currently, the Company's interest payment and debt repayment obligations in currencies other CAT and Aeronautical Radio of Thailand Ltd. to operate in the 1900 MHz. frequency), and Hutchison CAT than Thai Baht have been fully hedged using various financial instruments, principally cross currency Wireless Multimedia Co., Ltd. (a joint venture between CAT and Hutchison Telecommunications swaps and foreign currency forward contracts. Investment Ltd. to operate a CDMA service in the 800 MHz. frequency). The Company has established policies for the use of derivative financial instruments, including the The potential entry of these operators may have an impact on overall market growth and the Company's approval of counterparties with a minimum "A" credit rating and only entering into such transaction in market share. However, the Company believes that the scale and quality of its network, the size of its properly functioning and regulated capital markets. customer base and quality of customer service, its management expertise, its shareholders' commitment, and its financial resources will allow it to remain competitive and continue to be a market leader in the wireless services sector. annual report 2001 annual report 2001 22 Total Access Communication Plc. Total Access Communication Plc. 23 Market Share Wireless industryin Thailand The Telephone Organization of Thailand ("TOT") and The Communications Authority of Thailand ("CAT"), At end 2001 the wireless services market had around 8 million customers. This equates to a under the supervision of the Ministry of Transport and Communications, and private sector operators penetration rate of 13% compared to 6% at the end 2000. The DTAC brand launch and network operating under concessions awarded by the two State agencies, are the principal sources of service to expansion, and innovative marketing campaigns and the promotion of prepaid services by both the major the Thai telecommunications market today. The concessions were granted in the early 1990s in the form operators spurred this increase of approximately 4 million net new subscribers. Total Market share of Build-Transfer-Operate ("BTO") contracts to assist the State agencies to keep pace with the growing (as of end 2001) TOT DPC 0.29% CAT demand in the Country for telecommunication generally, and wireless services in particular. 4.77% 0.10%
DTAC Under the BTO agreements, private sector enterprises are required to build and operate 34.39% AIS telecommunication networks and provide services on a revenue sharing basis with the State agency 60.45% awarding the concession. Network infrastructure is transferred to the concession-granting agency once it is installed. The concessionaire has the exclusive right to use the assets transferred for the term of the Source : DTAC As of end 2001, customers electing for prepaid service accounted for approximately 40% of total mobile user. concession. As well as being operators in their own right, TOT and CAT are also currently the effective DTAC Customer Base regulators of the telecommunications industry in Thailand. At the end of 2000 At the end of 2001
Prepaid Prepaid Thailand has obligations under its agreement with the World Trade organization to fully liberalize the 12% 32% telecommunication sector by 2006. Towards this, various initiatives have commenced including planning for the corporatization and privatization of TOT and CAT. In 2000 The Frequency Allocation Act Postpaid established a National Telecommunications Commission ("NTC") to be the independent regulator of the Postpaid 68% 88% industry. Responsibility will be transferred to this body once members have been selected. In 2001 The Data and Other Value Added Services Source : DTAC Telecommunication Service Act was passed and established a basic framework for the industry. This Act provides for the right of operators currently working under concession arrangements to convert these A full range of data and other value added service (VAS) is offered in the Thai market. Services include contracts to licenses awarded by the NTC upon reaching mutual agreement with the State Agencies Voice Mail Service, International Roaming service, Voice Based Data service, General Packet Radio awarding the concessions. Services ("GPRS"), and Short Message Service ("SMS"). Despite the launch of GPRS in 2001 and increasing popularity of SMS, in 2001, all VAS accounted for only approximately 4 - 5% of total market Operators revenue in Thailand. SMS usage in particular is still below Asian averages. Currently there are seven wireless services operators in the Country. As of end 2001 five had commenced operations. SMS Usage Pattern in Asia Pacific Operator Major shareholder System Bandwidth Concession Concession end 300.00 h t
(MHz) granted by n Philippines o 250.00 DTAC UCOM (42%) AMPS 800-bandB 13.5 CAT 2018 m / r
Telenor (30%) PCN 1800 50 e 200.00 s
TOT (10%) u /
AIS SHIN (41%) NMT 900 7.5 TOT 2016 S 150.00
M Japan Singapore SingTel (20%) GSM 900 10.0 S 100.00 d
DPC AIS (95%) PCN 1800 12.6 CAT 2018 n u
o 50.00 b Indonesia Malaysia TA-Orange* Orange SA (49%) PCN 1800 12.6 CAT 2018 t Korea New Zealand Australia u China India Taiwan Hong Kong TA (41%) O 0.00 Thailand CP Group (10%) 0.00 0.05 0.10 0.15 0.20 Hutchison Hutchison (49%) CDMA 800 10.0 CAT N/A CAT* CAT (35%) - band A Cost per Outbound SMS (US$) TOT State Enterprise NMT 470 5.0 TOT N/A Source : Gartner Thai Mobile TOT (55%) GSM 1900 N/A N/A N/A CAT (40%) Note : *TA-Orange and Hutchison CAT are scheduled to launch their service in the 1Q02 Source: Agricultural and Services Team, Bank of Thailand annual report 2001 annual report 2001 24 Total Access Communication Plc. Total Access Communication Plc. 25 The Milestones in Our History Total Access Communication Plc. Story
September 1991 AMPS 800 mobile telephone services launched under the WorldPhone
Who are we? 800 brand.
September 1994 GSM 1800 digital cellular services introduced under the WorldPhone Background 1800 brand.
Total Access Communication (Public) Company Limited or "DTAC" was founded in August 1989 as a February 1995 Registered as a public company and listed on the Stock Exchange of company limited under the Civil and Commercial Code, with registered capital of one million Baht, Singapore later in the same year, making it the first Thai company to have divided into 100,000 ordinary shares with a par value of 10 Baht per share. The Company primarily stock listed on an overseas market. provides wireless telecommunication service in Thailand, using both analog (AMPS 800) and digital (GSM1800) platforms. These systems operate in 28 MHz of the 800 MHz frequency and 100 MHz of the 1800 MHz frequency respectively. The AMPS 800 network has coverage throughout Thailand, including January 1996 Registered in the Bangkok Stock Dealing Center, Over the Counter Market . the Bangkok area and other major towns, cities and highways. The GSM1800 network covered approximately 70% of the country's population at the end of 2001. In March 2001, the Company July 1998 Signed an agreement to extend repayment schedule for US$ 537 million launched its new identity and principal brand name, "DTAC" and the related service philosophy of "Make of debts. It Easy". The Company also distributes cellular telephones and accessories as well as other telecommunication equipment. May 2000 United Communication Industry (Public) Company Limited (UCOM), the