(Translation version) The Opinion of Independent Financial...

(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

The Opinion of Independent Financial Advisor regarding the Acquisition of Assets

Glossary NBTC The National Broadcasting and Telecommunications Commission

NTC The National Telecommunications Commission

OFNB Office of the National Broadcasting and Telecommunication (Now is NBTC)

The Company or TRUE True Corporation Public Company Limited

TUC True Move H Universal Communication Company Limited

Independent Financial Advisor

or IFA


BTFP Broadcasting and Telecommunications Research and Development Fund for

the Public Interest

SET The Stock Exchange of Thailand

AIS Advanced Info Service Public Company Limited

DTAC Total Access Communication Public Company Limited

JAS Jasmine International Public Company Limited

TOT TOT Public Company Limited

CAT CAT Telecom Public Company Limited

LG Letter of Guarantee

HSPA High Speed Packet Access

3G Third Generation of Mobile Telephone

4G Fourth Generation of Mobile Telephone

LTE Long-Term Evolution

DIF Digital Telecommunications Infrastructure Fund

ARPU Average Revenue per User

CAGR Compound Annual Growth Rate

IC Interconnection Charge

EBITDA Earnings Before Interest Tax Depreciation and Amortization

FCFF Free Cash Flow to Firm

MLR Minimum Loan Rate

MVNO Mobile Virtual Network Operator

NPV Net Present Value

IRR Internal Rate of Return

WACC Weighted Average Cost of Capital



Table of Contents

Executive Summary ............................................................................................................................................. 3

Part 1. The General Characteristics of the Transaction ................................................................................... 6

Part 2. Details of the Company and TUC ......................................................................................................... 19

Part 3. Appropriateness and Advantages of the Transaction ........................................................................ 28

3.1 The Objective of the Transaction ......................................................................................................... 28

3.2 The Advantages of Entering into the Transaction .............................................................................. 34

3.3 Disadvantages and Risk of Entering into the Transaction ................................................................ 37

3.4 Other Options in case of not Entering into the Transaction ............................................................. 41

Part 4. The Reasonableness of the Price ......................................................................................................... 42

4.1 Comparison Approach using Prices Paid in the Same Spectrum Actions Abroad ........................ 42

4.2 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 ............................................................................................................................... 46

4.2.1 The feasibility analysis of mobile phone service business after obtain 1800 MHz and 900 MHz ..... 46

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 .................................................................................... 63

Part 5. Conclusion of the IFA’s opinion ........................................................................................................... 69

Enclosure 1 Sensitivity Analysis in each case ............................................................................................... 71

Enclosure 2 10-Year Inflation Rate (2006-2015) .............................................................................................. 75



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 2016. 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 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”), 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

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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 2013-2015, 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.



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



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 2016. 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


http://dict.longdo.com/search/aforesaid


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.



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

2013-2015. 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 8.5-9.1 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.



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. 2553 (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. 2012-2016 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

expiry date

Spectrum bandwidth

True Move Co., Ltd* 15 Sep 2013 1710 – 1722.6 MHz /1805 –1817.6 MHz 2X12.6 MHz

Digital Phone Co., Ltd* 15 Sep 2013 1747.9–1760.5 MHz/1842.9–1855.5 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 2033 1710 – 1725 MHz /1805 –1820 MHz 2x15 MHz

Set 2 Advance Wireless Network Co., Ltd 15 Sep 2033 1725 – 1740 MHz /1820–1835 MHz 2x15 MHz

Concession of 900 MHz spectrum of TOT

concessionaire concession

expiry date

Spectrum bandwidth

AIS** 30 Sep 2015 897.5 – 915 MHz /842.5–960 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

obtaining License

895 – 905 MHz /940–950 MHz 2x10 MHz

Set 2 TUC 905 – 915 MHz /950–960 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



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



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



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 1710 – 1725 MHz/1805 –1820 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 1st installment

payment of auction fee and submit a letter of bank guarantee for the remaining amount of auction fee to

NBTC on 25 November 2015. 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 License Fee

(million baht)

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

19,896

(TUC made the 1st 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

obtaining the License


fee

9,948




fee

9,948

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

905 – 915 MHz /950 – 960 MHz (the second slot) at the total bid price of 76,298 million baht ( VAT

Excluded).



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 1st installment of auction fee 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 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 License Fee

(million baht)

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 the minimum price of the

licenses for 900 MHz spectrum

8,040


obtaining the License and submit a letter of bank

guarantee for the remaining amount of auction fee



4,020


obtaining the License and submit a letter of bank

guarantee for the remaining amount of auction fee



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

900 MHz spectrum

51,600

Total estimated amount to be paid or total value of consideration 167,690

Total Assets of the Company as of 31 December 2015 282,844

The portion of value of consideration to total assets of the Company

approximately

59.29%



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 1710 – 1725 MHz

/1805 –1820 MHz Bandwidth 15 MHz on 4 December 2015. While Spectrum Licensing of 900 MHz

bandwidth covering 905 – 915 MHz /950 – 960 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 1st 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.



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 84,844.39 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 8,484,438,695 99.99999

2. Asia Wireless Communication Company Limited 1 0.00001

3. Mr. Vichaow Rakphongphairoj 1 0.00001

Total 8,484,438,697 100.00000

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 1710-1725 MHz

and pairing to 1805-1820 MHz, which are valid from 4 December 2015 (the date that TUC obtained the

license) until 15 September 2033.

(2) The 900 MHz Spectrum License for spectrum bandwidth size 10 MHz, covering 905 – 915 MHz

and pairing to 950 – 960 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 1st 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 2016. (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.



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 2016.

1.6 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 2016. 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 2016 – 30 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 2016.

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 TSR1

Estimated Exercise

Price of TSR1

(baht/share)

Amount of

Money

(million baht)

The amount expected to be received from the capital increase 10,169 5.9 60,000

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



Note: 1 IFA assumes that the number of TSR units issued to existing shareholders is 1 0 ,1 6 9 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 2016.

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)

Items Before

Capital Increase

Impact from Capital

Increase (Decrease)

After Capital

Increase

Cash and Cash Equivalent1 10,593 20,000 30,593

Interest Bearing Debt 98,052 (40,000) 58,052

Shareholder Equity 74,547 60,000 134,547 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) 2015 2016 2017 2018 2019 2020 2021 Total

1800 MHz Spectrum License

(Already paid on 25 November 2015) 19,896 - - - - - - -

1800 MHz Spectrum License - - 9,948 9,948 - - - 39,792

900 MHz Spectrum License - 8,040 - 4,020 4,020 60,218 - 76,298

Investment plan for procuring

telecommunication networks1 - 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 5,600 167,690

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 2017-2021, 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.



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 No. NBTC/FREQ/TEL/55/2

(1st Amendment)


(During the fulfillment of condition precedent before

issuing the license)

• Bandwidth covering 1710-1725 MHz pairing to

1805-1820 MHz

• Bandwidth covering 905-915 MHz pairing to 950-

960 MHz

• Effective since 3 December 2015 to 15 September

2033

• Effective 15 years from the date of obtaining the

license

• The payment of the auction fee are in 3 installment

as follows:

The 1st installment pay 50% of total auction fee within

90 days after receiving the official notification of

auction result

The 2nd installment pay 25% of total auction fee

Within 15 days after a lapse of 2 years from the date

of obtaining the License

The 3rd installment pay 25% of total auction fee

Within 15 days after a lapse of 3 years from the date

of obtaining the License

• The payment of the auction fee are in 4 installment

as follows:

The 1st installment pay the auction fee of 8,040

million baht within 90 days after receiving the official

notification of auction result

The 2nd installment pay the auction fee of 4,020

million baht within 15 days after a lapse of 2 years

from the date of obtaining the License

The 3rd installment pay the auction fee of 4,020

million baht within 15 days after a lapse of 3 years


The 4th installment pay the remaining amount Within

15 days after a lapse of 4 years from the date of


• 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


- Not less than 50% of total population within 8

years from the date of obtaining the License

• Coverage obligation as follows;





• 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




Spectrum License No. NBTC/FREQ/TEL/55/2

(1st Amendment)


(During the fulfillment of condition precedent before

issuing the license)

period.

• 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



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.



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

• Bangkok Bank Public Company Limited

• The Siam Commercial Bank Public Company Limited

• 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

• Bank of China (Thai) Public Company Limited

• Credit Line of LG of 21,288.72 million baht • Credit Line of LG of 38,036.06 million baht and

35,000.00 million baht

• In order to guarantee payment for the 2nd and 3rd

installment for the Spectrum License of 1,800 MHz

• In order to guarantee payment for the 2nd ,3rd and 4th

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 94,324.78 million baht which consists of.

• Credit Line of LG of 2 1 ,288.72 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 7 3 ,036.0 6 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 2017 2018 2019 2020 Total

1800 MHz 10,644 10,644 - - 21,289

900 MHz - 4,301 4,301 64,433 73,036

Total 10,644 14,946 4,301 64,433 94,325



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.



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 0105553045044. 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 2027. 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 2016.

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).



2.4 Shareholders of TUC

No Name Number of Shares (Shares) % Holding (%)

1. True Corporation Public Company Limited 8,484,438,695 99.99999

2. Asia Wireless Communication Company Limited 1 0.00001

3. Mr. Vichaow Rakphongphairoj 1 0.00001

Total 8,484,438,697 100.00000

Source: Shareholder List of TUC as of 29 September 2015

2.5 Summary of Financial Position of TUC during 2013-2015 (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 2013 31 Dec 2014 31 Dec 2015

THB million % THB million % THB million %

Cash and cash equivalent 7,596 6.6 3,991 2.8 5,376 2.9

Trade and other receivables 33,903 29.6 60,109 42.0 38,817 21.3

Inventory-net 4,736 4.1 3,996 2.8 8,049 4.4

Other current assets 2,007 1.7 3,517 2.5 6,524 3.6

Total current assets 48,242 42.1 71,613 50.0 58,766 32.2

Property, plant and equipment, net 40,896 35.7 43,366 30.3 56,676 31.1

Intangible assets, net 23,000 20.1 21,604 15.1 58,389 32.0

Other non-current assets 2,546 2.2 6,677 4.7 8,538 4.7

Total non-current assets 66,442 57.9 71,647 50.0 123,604 67.8

Total Assets 114,684 100.0 143,260 100.0 182,370 100.0

Short-term borrowings 1,930 1.7 300 0.2 13,945 7.6

Trade and other payables 53,726 46.8 77,181 53.9 50,650 27.8

Current portion of long-term borrowings 1,477 1.3 - - 4,991 2.7

Short-term loans from related parties 70 0.1 6,500 4.5 19,800 10.9

License payable within one year 3,256 2.8 3,295 2.3 - -

Other current liabilities 2,386 2.1 3,555 2.5 2,041 1.1

Total current liabilities 62,846 54.8 90,831 63.4 91,427 50.1

Long-term borrowings 26,441 23.1 - - 19,948 10.9

Accrued license fee 3,256 2.8 - - 18,744 10.3

Other non-current liabilities 9,253 8.1 6,603 4.6 5,343 2.9

Total non-current liabilities 38,951 34.0 6,603 4.6 44,035 24.1

Total liabilities 101,797 88.8 97,435 68.0 135,462 74.3

Paid-up capital 46,244 40.3 84,844 59.2 84,844 46.5

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 241 0.2 131 0.1 96 0.1

Total shareholders’ equity 12,887 11.2 45,826 32.0 46,908 25.7

Total liabilities and shareholders’ equity 114,684 100.0 143,260 100.0 182,370 100.0



Items

Consolidated Financial Statement

31 Dec 2013 31 Dec 2014 31 Dec 2015

THB million % THB million % THB million %

Revenue from providing services 35,211 54.9 38,406 51.8 45,052 54.5

Revenue from interconnection 4,764 7.4 4,012 5.4 4,755 5.8

Revenue from network rental 8,082 12.6 15,480 20.9 16,018 19.4

Revenue from product sales 16,059 25.0 16,260 21.9 16,846 20.4

Total Revenue 64,116 100.0 74,158 100.0 82,671 100.0

Cost of Providing Services

Cost of providing service (excluding the cost of

interconnection) 20,773 32.4 31,777 42.9 35,587 43.0

Interconnection cost 5,974 9.3 4,937 6.7 5,517 6.7

Regulatory cost 2,998 4.7 379 0.5 422 0.5

Depreciation and amortization 8,004 12.5 7,112 9.6 5,107 6.2

Total cost of providing services 37,749 58.9 44,205 59.6 46,633 56.4

Cost of Sales 15,019 23.4 15,703 21.2 16,829 20.4

Selling and administrative expenses (SG&A)

Cash SG&A 14,443 22.5 13,593 18.3 14,193 17.2

Depreciation and amortization 1,756 2.7 2,372 3.2 4,308 5.2

Total Selling and administrative expenses 16,199 25.3 15,965 21.5 18,501 22.4

EBITDA 4,909 7.7 7,769 10.5 10,123 12.2

Operating Profit (4,851) (7.6) (1,715) (2.3) 708 0.9

Interest income 51 0.1 51 0.1 53 0.1

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) 2,861 3.9 (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 11 - 11 - 35 -

Non- recurring items (6,697) (10.4) (4,569) (6.2) 1,506 1.8

Net profit (loss) for the year (17,696) (27.6) (5,645) (7.6) 1,117 1.4

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.



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 2015.

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.



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

http://thaitelecomkm.org/TTE/topic/attach/470MHz_Cellular_Mobile_Telephone_System/index.php#k

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 2014.

4,729 4,565 4,792 4,716 5,026 4,596 4,823 4,658 4,851 4,448 4,488 4,736

10,777 10,956 10,161 9,849 9,400 9,226 8,390 8,220 7,754 7,328 7,086 7,084

19,932 19,373 19,164 18,807 17,977 17,630 16,756 16,651 16,253 15,731 14,478 14,085

35,438 34,894 34,117 33,372 32,403 31,452 29,969 29,529 28,858 27,507 26,052 25,905

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Mill

ion

Voice Revenue

TRUE DTAC AIS


http://thaitelecomkm.org/TTE/topic/attach/470MHz_Cellular_Mobile_Telephone_System/index.php%23k


Source: AIS (http://investor.ais.co.th/quarterly_report.html) DTAC (http://dtac.listedcompany.com/results.html) 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 2014. 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.

3,025 3,178 3,591 3,669 3,836 3,928 4,179 4,749 5,070 5,653 6,012 6,712 5,000 5,374 5,926 6,283 6,575 6,869 7,045 7,322 7,456 7,607 7,784 7,899 7,483 7,767 7,850 8,158 9,243 10,233 10,971 11,595 12,287 12,973 13,759 14,174 15,508 16,319 17,367 18,110 19,654 21,030 22,195 23,666 24,813 26,233 27,555 28,785

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Mill

ion

Non-voice revenue

TRUE DTAC AIS


http://investor.ais.co.th/quarterly_report.html

http://dtac.listedcompany.com/results.html



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, 2nd rank was

DTAC with the market share of 25.3 million subscribers or 30.4% of total market share, and 3rd 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%, 2nd rank was DTAC with the market share of 30.6, and 3rd 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 1st rank was AIS with the

market share of 37.6%, 2nd rank was TRUE with the market share of 32.5%, and 3rd rank was DTAC with the

market share 29.9%.

21.5

22.1

22.4

22.9

19.8

19.7

19.8

19.8

17.5

15.4

14.1

14.4

23.6

24.0

24.1

24.4

24.6

24.4

24.0

24.2

24.4

22.9

20.7

20.9

33.2

9

33.7

2

35.0

7

36.5

9

37.9

0

38.2

2

39.0

1

39.3

6

36.8

9

34.8

4

32.4

5

33.0

6

78.4 79.8 81.6 83.9 82.3 82.3 82.8 83.3 78.8 73.1

67.3 68.4

Mill

ion

Number of Subscribers (Prepaid)

TRUE DTAC AIS

2.6

2.7

2.9

3.2

3.3

3.5

3.7

3.9

4.0

4.1

4.3

4.7 3.

0 3.2 3.3 3.5 3.6

3.7 3.7 3.9 4.0

4.1 4.1 4.3 3.

8 3.9 4.1 4.3 4.5 4.7 4.8 4.9 5.1 5.2 5.4 5.4

9.5 9.9 10.3 10.9 11.4 11.8 12.2 12.7 13.1 13.4 13.8 14.5

Mill

ion

Number of Subscribers (Postpaid)

TRUE DTAC AIS






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.

215 205 197 192 180 177 171 173 178 188 192 195

162 164 157 159 154 147 141 144 141 143 150 162

64 58 59 55 59 52 61 64 7084

100 111

-

50

100

150

200

250

(bah

t/num

ber/m

onth

)

ARPU- Prepaid

AIS DTAC TRUE

683 686 698 666 651 666 650 639 629 627 630 612 611 605 603 591 600 596 580 570 553 537

515 519 569 573 589 575 559 544

514 497 503 486 478502

400

500

600

700

800

(bah

t/num

ber/m

onth

)

ARPU- Postpaid

AIS DTAC TRUE






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.

263 253 245 236 227 227 221 222 228 242 249 254

210 214 209 210 208 203 197 200 195 198 204220

126 121 126 124 129 125 130 134 143162

184204

100

200

300

400

(bah

t/num

ber/m

onth

)

ARPU - Blended

AIS DTAC TRUE





Part 3 . Appropriateness 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 non-

voice 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 (2011 - 2015), 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 high-

definition 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 2.7-4 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

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

61%

61%

60%

60%

59%

58%

57%

56%

55%

54%

56%

54%

53%

51%

48%

46%

44%

43%

40%

38%

15%

15%

17%

17%

19%

20%

22%

23%

24%

26% 30

%

31%

33%

35%

37%

39%

40%

42%

45%

47%

24%

23%

23%

22%

22%

22%

21%

21%

21%

20% 14

%

15%

14%

14%

15%

15%

15%

16%

14%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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



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 9 0 0 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



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: http://droidsans.com/3g-4g-differences-why-it-keeps-switching

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.


http://droidsans.com/3g-4g-differences-why-it-keeps-switching


Technology Spectrum (MHz)

850 900 1800 2100

2G - 5 - -

3G 15 - - 5

4G - 5 15 10

Total 15 10 15 15

( 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 49-799 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 2013-2015, 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

(million baht) 2012 % 2013 % 2014 % 2015 %

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 69,773 100% 74,597 100% 74,811 100% 83,831 100%

Source: The Company

* Excludes the revenue from rental of network and interconnection charge



Number of Subscriber of Postpaid, Prepaid, and ARPU of the Company

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

569 573 589 575559 544 514

497 503 486 478502

64 58 59 55 59 52 61 64 70 84 100 111

126 121 126 124 129 125 130 134 143 162184 204

0

100

200

300

400

500

600

700

0.0

5.0

10.0

15.0

20.0

25.0

30.0

ARPU

Tota

l Sub

scri

ber (

miil

ion)

Number of Subscribers (Prepaid) Number of Subscribers (Postpaid)ARPU (Postpaid) ARPU (Prepaid)



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 (2013-2015)

Source: The Company

* Excludes the revenue from rental of network and interconnection charge

-5.3% -7.2%-0.6% -2.6%

6.3%0.7% 0.6% -1.2% -3.5% -3.2%-6.9%

1.7%

70.7%

50.5%50.4%

32.7%26.8%23.6%

16.4%

29.4% 32.2%

43.9% 43.9% 41.3%

-20.0%-10.0%0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

%ch

ange

YoY

Rev

enue

(m

illio

n ba

ht)

Voice Non-voice Voice %chg YoY Non-voice %chg YoY



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 2025

2100 MHz 15 MHz 2027

900 MHz 10 MHz 2030

1800 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 0.78 -1.98 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

Total Number of

Customer (million)

Average Bandwidth/Customer

(Hz/Customer) 850 MHz 900 MHz 1800 MHz 2100 MHz

The Company 15 MHz 10 MHz 15 MHz 15 MHz 55 MHz 19.1 2.88

AIS - - 15 MHz 15 MHz 30 MHz 38.5 0.78

DTAC 10 MHz - 25 MHz 15 MHz 50 MHz 25.3 1.98

JAS - 10 MHz - - 10 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 3 0 % per year. Therefore, the acquisition of the two



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 9 0 0 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

150-190 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.



(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 2010-2012, the postpone of the 1800 MHz

spectrum auction during the year of 2013-2015, the postpone of the 900 MHz spectrum auction in late 2015.

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 2030-2033, 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 2027.



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 2015 – 2020.


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.



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:



• 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.

Source: NBTC

Note: In 2015, the number of mobile phone decrease since the concession of 900 MHz spectrum license of one

provider expires.

47%61%

80%93% 99%

109% 117%128%

139% 145%124%

0%20%40%60%80%

100%120%140%160%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mobile Penetration rate (%)

Post-Paid Pre-Paid Total Penetration



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 9 7 % 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


(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

48.3

47.6

45.2

45.0 47.0

48.7

49.4

49.0

49.5

49.5

49.9

49.2

32.2

32.9

34.1

34.7

33.5

32.7

31.7

30.9

30.0

29.0

28.2

27.4

19.5

19.5

20.7

20.3

19.5

18.7

18.8

20.1

20.4

21.5

21.8

23.3

10.015.020.025.030.035.040.045.050.055.0

(%)

AIS DTAC TRUE





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.



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.



Part 4 . The 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 2013-2015, 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:


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 2033.

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 2011-2015 as

follows:



1800 MHz South

Korea Singapore Italy Greece India Germany Thai (TUC)

Number of population

(million people) 50.4 5.5 61.3 11.0 1,295.3 80.9 67.7

GDP/Population

(million baht) 1.0 2.0 1.2 0.8 0.1 1.7 0.2

ARPU

(baht/pop./month) 893 1,231 476 412 66 528 204

Year of Auction 2011 2011 2011 2011 2011 2015 2015

Number of Bidders 2 3 4 3 5 3 4

Bid Price

(Baht/MHz/Pop.) 63.5 31.4 12.5 10.7 11.9 12.1 39.2

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 http://telecoms.com/

GDP/population (million baht) and number of population from World Bank

Mobile penetration rate of abroad: http://www.indexmundi.com 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 2nd rank. The overall value of Spectrum License of 1800 MHz is between 10.7 –

63.5 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.

10.7

11.9

12.1

12.5

31.4

39.2

63.5

0 10 20 30 40 50 60 70

Greece

India

Germany

Italy

Singapore

Thailand(TUC)

S.Korea

Auction Fee(THB/Hz/population) of 1800 MHz Spectrum

THB




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 112.7 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 2011-2015 as

follows:

900 MHz Hong

Kong Spain Greece Hungary Romania Germany Thai (TUC)

Number of population

(million people) 7.2 46.4 11.0 9.9 19.9 80.9

67.7

GDP/Population

(million baht) 1.4 1.1 0.8 0.5 0.4 1.7 0.2

ARPU

(baht/pop./month) 811 616 412 447 240 528 204

Year of Auction 2011 2011 2011 2012 2012 2015 2015

Number of Bidders 4 4 3 4 5 3 4

Bid Price

(Baht/MHz/Pop.) 118.8 20.4 24.2 71.1 19.2 9.6 112.7

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 http://telecoms.com/

GDP/population (million baht) and number of population from World Bank

Mobile penetration rate of abroad: http://www.indexmundi.com 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 113.5

baht/MHz/people, which is in the 2nd rank. The overall value of Spectrum License of 900 MHz is between 9.6 – 118.8

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.


http://telecoms.com/


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.

9.6

19.2

20.4

24.2

71.1

112.7

118.8

0 20 40 60 80 100 120 140

Germany

Romania

Spain

Greece

Hungary

Thailand(TUC)

Hongkong

Auction Fee(THB/Hz/population) of 900 MHz Spectrum

THB



4.2 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


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 2013-2015, 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.

4.2.1 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



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 2033. 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 2016 -15 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 2015. 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 14th, 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: http://www.efinancethai.com/hotnews/hot/index.aspx?name=h_260216h&release=y

The new customers accounted for approximately 30% percent of the total customer base as

mentioned above. While the customers during 2018 – 2026, 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.



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 (2006-2015), 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 2015. 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) 14.40 17.90 18.90 19.15 19.40 19.65 19.90 20.15 20.40

Increasing number of

subscribers during the period



end


Average Number of

subscribers


ARPU

(baht/subscriber/month) 111 111 111 111 111 111 111 111 111

Revenue from Prepaid

(million baht) 21,512 24,509 25,341 25,674 26,007 26,340 26,673 27,006 27,339



beginning



subscribers during the period

(million subscribers) 0.25 0.25 - - - - - - -





end


Average Number of

subscribers


ARPU



(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 2015. 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 2013-2015, 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 (2006-2015), 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 3rd 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



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 3rd quarter of 2015

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


beginning


Increasing number of subscribers

during the period


Number of subscribers at the end


Average Number of subscribers


ARPU


Revenue from Postpaid (million

baht)

30,421

34,638

38,855

43,072

47,288

51,505

55,722

59,939

64,156



beginning


0.4

0.45 0.46

0.17 0.180.16

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

AIS DTAC TRUE

Voice(THB/Min)

Mobile Internet(THB/MB)





during the period

(million subscribers) 0.70 0.70 - - - - - - -





ARPU


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 204-256 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 0.45 - 2.36 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.

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 15/9/2033

- 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 2013-2015.

2.36 2.20 2.12 2.04 1.97 1.91 1.85 1.79 1.74 1.69

1.19 1.19

0.75 0.75 0.75 0.75

0.45 0.45

-

0.50

1.00

1.50

2.00

2.50

2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F 2030F 2031F 2032F 2033F

Bandwidth per Subscriber (Hz/unit)

850

2100

900



(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


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 2015. 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:


Interconnection Charge 6,141 6,994 7,591 8,129 8,667 9,205 9,743 10,281 10,819


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 4 0 -4 2% of revenues from

mobile phone services throughout the projection period based on the historical ratio between the years of

2013-2015 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.



- 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


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- 1800 MHz 2,261 2,247 2,247 2,247 2,247 2,247 2,247 2,247 2,247


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


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- 900 MHz 5,087 5,087 5,087 5,087 5,087 5,087 1,260 - -

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 2014-2015.

- 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 2015. 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



growth at 2.5% over the projection period, based on the 10 years historical inflation rate (2006-2015) 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 2015.

- 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



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 140 159 173 185 197 209 221 234 246

Bank fees-LG 1,903 935 795 654 141 - - - -

Total Selling and administrative expenses 17,968 15,862 16,619 17,343 17,715 18,480 19,406 20,354 21,326



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 258 270 276 276 276 276 276 276 195

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.



License Fee


1st 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)

2nd Installment Pay 25% of total auction fee (9,948 million baht) and submit a letter of bank

guarantee (LG) for the remaining 3rd installment (9,948 million baht) within 15 days after a lapse of 2

years from the date of obtaining the License (December 2017)

3rd 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)


1st 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)

2nd Installment Pay the auction fee of 4,020 million baht and submit a letter of bank guarantee (LG)

for the remaining 3rd and 4th installment (64,238 million baht) within 15 days after a lapse of 2 years

from the date of obtaining the License (March 2018)

3rd Installment Pay the auction fee of 4,020 million baht and submit a letter of bank guarantee (LG)

for the remaining 4th installment (60,218 million baht) within 15 days after a lapse of 3 years from the

date of obtaining the License (March 2019)

4th 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


(Already paid in 2015) 19,896 - - - -

1800 MHz Spectrum License - 9,948 9,948 - - 39,792

900 MHz Spectrum License 8,040 - 4,020 4,020 60,218 76,298

Total 27,936 9,948 13,968 4,020 60,218 116,090

Capital Expenditure; “CAPEX”

The Company's investment budget for this project is estimated at 51,600 million baht which

consist of;



- 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

investment 51,600 - - - - - -

51,600

General

investment - 6,849 6,238 7,528 5,469 6,603

6,000

(per year)

86,686

Total 51,600 6,849 6,238 7,528 5,469 6,603 54,000 138,286

The summarized of Cash outflows on CAPEX over the projection period (2016F-2030F)


Major investment 20,000 5,000 7,000 7,000 7,000 5,600 - 51,600

General

investment -

2,654 3,081 4,451 4,624 5,886 2,200-6,300

(per year)

86,686

Total 20,000 7,654 10,081 11,451 11,624 11,486 65,989 138,286

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 12-25 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.



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

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 2015. 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

Where

Risk Free Rate (Rf): 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).

Beta (ß): 1.50 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% + 1.50 X (12.15% - 2.80 %)

=16.83%

WACC = [Ke*E/(D+E) + Kd*(1-T)*D/(D+E)]

Ke = Rf + ß(Rm - Rf)



Therefore, WACC = [16.83% X 62.5% + 4.00% 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.


Total revenue from providing

services 61,969 70,577 76,602 82,031 87,460 92,889 98,318 103,747 109,176

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 1,360 975 917 932 909 928 966 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 1st installment payment for 1800 MHz spectrum license which has been paid on 25 November 2015



services 114,605 120,034 122,749 122,749 122,749 122,749 122,749 122,749 86,429


Gross Profit 41,976 44,264 45,241 44,908 44,574 44,241 48,067 49,327 32,459


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


Less License Fee - - - - - - - - -


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



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

2015. 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 2015. 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. 2007- 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 % -

+0 .9% 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.



Summarized evaluation of the return on investment the case of 4.2.1

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

Factors Range NPV (million baht) IRR (%/year) Payback Period

(year)

1. Number of Subscribers +/- 5% 8,644 - 17,904 13.11 - 14.54 8.6–9.0

2. ARPU +/- 2.5% 7,676 - 18,872 12.94 - 14.73 8.5 –9.1

3. WACC +/- 0.5% 9,832 -16,926 13.83* 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.



The Projection of Cash flow and the sufficiency of source of funds in case of 4.2.1.


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) 13 71 (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


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 97,955 122,016 145,600 170,175 194,483

Ending cash 24,106 48,507 73,442 97,955 122,016 145,600 170,175 194,483 211,047

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 747 747 837 847 1,767 2,567 2,027 1,307 464

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.



Loans of the Group of the Company during 2003-2014

Source: Form 56-1



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 2016 - 6 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


million subscribers same as case (1), and will be new customers about 0.25 million subscribers during 2016

– 2026 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


beginning (million subscribers) 14.40 14.65 14.90 15.15 15.40 15.65 15.90 16.15 16.40 16.65 16.90 17.15


during the period

(million subscribers) 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 -


(million subscribers) 14.65 14.90 15.15 15.40 15.65 15.90 16.15 16.40 16.65 16.90 17.15 17.15



ARPU

(baht/subscriber/month) 111 111 111 111 111 111 111 111 111 111 111 111


(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



- Number of Postpaid subscribers


million subscribers same as case (1), and will be new customers about 0.5 million subscribers during 2016 –

2026 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



subscribers during the

period

(million subscribers) 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 -

Number of subscribers at

the end


Average Number of

subscribers


ARPU

(baht/subscriber/month) 502 502 502 502 502 502 502 502 502 502 502 502


(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

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

1.51 1.46 1.41 1.36 1.31 1.27 1.23 1.20 1.16 1.13

0.55 0.55

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F

Bandwidth per Subscriber(Hz/Number)

850



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)


Major investment 51,600 - - - - - - 51,600

Additional: Major

investment 45,000 - - - - - - 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 30,000 159,286

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

investment

17,442 4,360 6,105 6,105 6,105 4,884 - 45,000

General investment - 2,654 3,081 4,451 4,624 5,886 3,600-6,300

(per year)

62,686

Total 37,442 12,015 16,186 17,556 17,729 16,369 41,989 159,286

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.



services 58,667 62,659 66,650 70,642 74,633 78,625 82,616 86,607 90,599


Gross Profit 21,898 23,937 26,082 27,590 29,213 30,773 32,367 33,960 35,554


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








Free Cash Flow to the Project (27,185) 1,792 (829) (1,036) 174 2,658 13,716 14,783 15,826


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



Summarized evaluation of the return on investment the case of 4.2.2

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 = 12.47 % 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 4.2.1 Obtaining 1800 MHz and 900 MHz Spectrum License 13,274 13.83

Case 4.2.2 Without 1800 MHz and 900 MHz Spectrum License 2,137 12.47

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 2013-2015. The main assumptions which



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.



Part 5. Conclusion 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 2013-2015.

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 8.5-9.1 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.




(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.



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



Enclosure 1 Sensitivity Analysis in each case

(A) The number of subscribers is expected to increase every year, increase by 5% per year from the

previous assumption. Other assumptions remain constant.

(NPV = 17,904 million baht, IRR = 14.54% per year, Payback Period = 8.6 year)


Total revenue from providing services 62,234 71,272 77,599 83,299 89,000 94,700 100,401 106,101 111,802


Gross Profit 19,968 23,184 26,533 28,867 31,315 33,700 36,119 38,537 40,956

Total Selling and administrative expenses (18,009) (15,930) (16,712) (17,459) (17,854) (18,641) (19,591) (20,562) (21,556)

EBIT 1,959 7,254 9,822 11,408 13,461 15,059 16,528 17,976 19,400

EBIT after tax 1,567 5,803 7,857 9,126 10,769 12,047 13,223 14,381 15,520


Less License Fee (27,936)1 (9,948) (13,968) (4,020) (60,218) - - - -






Note 1. Includes the 1st installment payment for 1800 MHz Spectrum License which has been paid on 25 November 2015




Gross Profit 43,375 45,793 46,836 46,502 46,169 45,836 49,662 50,922 33,582


EBIT 20,800 22,174 22,383 21,426 20,440 19,422 22,533 23,043 13,398

EBIT after tax 16,640 17,739 17,907 17,141 16,352 15,538 18,026 18,434 10,719






Less Book value of existing spectrum - - - - - - - - -




(B) The number of subscribers is expected to increase every year, decrease by 5% per year from the

previous assumption





Gross Profit 19,721 22,525 25,571 27,643 29,829 31,952 34,108 36,265 38,421


EBIT 1,795 6,731 9,046 10,416 12,252 13,634 14,887 16,118 17,326

EBIT after tax 1,436 5,385 7,236 8,332 9,802 10,907 11,910 12,894 13,861


Less License Fee (27,936)1 (9,948) (13,968) (4,020) (60,218) - - - -










Gross Profit 40,578 42,734 43,646 43,313 42,979 42,646 46,472 47,732 31,336


EBIT 18,510 19,668 19,769 18,813 17,827 16,810 19,921 20,432 11,560

EBIT after tax 14,808 15,734 15,815 15,050 14,261 13,448 15,937 16,345 9,248










(C) ARPU increase by 2.5% from previous assumptions





Gross Profit 20,564 23,690 26,977 29,245 31,628 33,947 36,300 38,653 41,006


EBIT 2,356 7,624 10,140 11,671 13,668 15,211 16,625 18,016 19,385

EBIT after tax 1,885 6,099 8,112 9,337 10,935 12,169 13,300 14,413 15,508


Less License Fee (27,936)1 (9,948) (13,968) (4,020) (60,218) - - - -



Free Cash Flow to the Project (35,726) 55 (4,092) 6,144 (48,349) 13,628 20,297 21,859 23,396


Present value of the Project (46,415) 50 (3,279) 4,407 (31,041) 7,832 10,441 10,065 9,644





Gross Profit 43,359 45,712 46,722 46,389 46,056 45,722 49,549 50,809 33,502


EBIT 20,729 22,048 22,229 21,270 20,282 19,263 22,372 22,880 13,283

EBIT after tax 16,583 17,638 17,783 17,016 16,226 15,410 17,897 18,304 10,626










(D) ARPU decrease by 2.5% from previous assumptions





Gross Profit 19,125 22,019 25,128 27,265 29,517 31,705 33,927 36,149 38,371


EBIT 1,397 6,361 8,727 10,153 12,045 13,482 14,791 16,077 17,341

EBIT after tax 1,118 5,089 6,982 8,122 9,636 10,786 11,833 12,862 13,873


Less License Fee (27,936)1 (9,948) (13,968) (4,020) (60,218) - - - -










Gross Profit 40,593 42,815 43,759 43,426 43,093 42,759 46,586 47,846 31,416


EBIT 18,580 19,794 19,924 18,969 17,985 16,969 20,082 20,594 11,676

EBIT after tax 14,864 15,835 15,939 15,175 14,388 13,576 16,066 16,476 9,341










Enclosure 2 10-Year Inflation Rate (2006-2015)

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 p

CPI (2554=100) 87.3 89.2 94.1 93.3 96.3 100.0 103.0 105.3 107.3 106.3

% change 4.7 2.2 5.5 (0.9) 3.2 3.8 3.0 2.2 1.9 (0.9)

% Average change = 2.5

Source: BOT


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