Advanced Info Service Public Company Limited (ADVANC) Earnings Call Transcript & Summary

Good morning, everyone, and we hope you all stay well and healthy. Today, we have with us: Our CEO, Khun Somchai; our President, Khun Hui; and CFO, Khun Tee. While we're doing the presentation, we will also be muted our video so we can focus on the presentation. Today's session will be in for agenda. I will start with the first quarter performance, and our CEO will put -- will have some remarks. The key issues around 5G will be presented by our President, Khun Hui. And then our CFO will discuss around 2020 outlook. So let's begin with the first quarter performance. Okay. In summary, briefly, I think you've also seen the COVID impact. We started to see -- sorry, we started to see the COVID impact in early February and impact started to be resulted from the tourists, both inbound and outbound. That has resulted in lower international roaming as well as the tourism on the prepaid segment. So both of these, we saw a decline of more than 40%, both year-on-year and Q-on-Q. Also in late March, as the shop has been closed following the lockdown, we also started to see lower postpaid acquisition as well as some impact on the fixed broadband, which -- well, fixed broadband demand come quite late in March as well. So overall, the impact was mostly on the postpaid and prepaid acquisition. Also in the mobile space, we continue to see some price competition ongoing, especially with the unlimited data plan, and this happened both in the postpaid and prepaid segment. When we looked at the performance, overall, revenue has been flat first quarter as a result of both the COVID impact and also from the competition. With the continue cost conscious, our EBITDA will still grow around 4%, and the -- however, the NPAT declined by about 7.5%, and that's mainly because of the network investment and FX loss. We can discuss that later on. And on the outlook, we're now currently in the CapEx of THB 35 billion to THB 40 billion this year. That's include both broadband and mobile. A lot of that investment will be focusing on 4G capacity -- area that needs extra 4G. Obviously, the 2.6 gigahertz will also serve as 5G as we see early development. We continue to see some negative and positive outlook due to the COVID impact. CFO will discuss that later on as well, and we will, as a management will continue to focus on protecting revenue as well as managing costs. Next slide, on Slide #5. This is the summary of the first quarter performance. You see on the top chart with the service revenue, excluding IC and TOT revenue, and this is based on pre TFRS 16. That is flat year-on-year. In terms of composition, you see a decline in mobile, offsetting with the continued growth in fixed broadband. In terms of mobile a lot of that is due to both the decline in tourism on prepaid segment, international roaming as well. If we strip that out, the mobile loan will continue to be flat year-on-year. Onto profitability, down there, we started off with the first quarter '19 EBITDA pre TFRS 16. So on a like-for-like basis, you see the EBITDA growth of 4%, and that's mainly because we have some saving coming through the TOT rental agreement despite that revenue continued to be flat. And then moving on to the NPAT, we see an increase in the spectrum and also D&A, which pressured down the NPAT by 7.5%. So that's the NPAT of THB 7 billion on the pre TFRS 16. We are taking the impact of the TFRS, which is around THB 250 million then the reported NPAT after TFRS 16 is 7.6 -- THB 6.7 billion. Okay. Let's discuss a bit on the mobile revenue. So mobile dropped by 1.1%, and this is -- you see clearly a drop in the prepaid segment coming from the impact of tourism and competition as well. And the postpaid continued to grow, offsetting that decline in the prepaid segment. International roaming also declined because of the COVID. You see on the net adds, clearly, the impact on the prepaid, which declined by almost 900,000 is from -- mainly from the tourism, which started in early February. Postpaid side continued to have high single-digit growth. However, this has also been impact from the shop closure in the late March as well in terms of acquisition. [ You see, ] on the mobile ARPU continued to drop both year-on-year and Q-on-Q. This are mostly pressured by the continued unlimited price plan on both postpaid and prepaid side. Next slide. Now we'd like to show you a bit more details of the COVID impact. First chart on the top left is on the service revenue by month. You see that actually, January and February, we're still having year-on-year growth of 2 -- almost 2%, 2.5%. However, as the COVID impact emerged more clearly in March, the mark has dropped by about 4%. And international roaming, you see also that starting in the first quarter, is dropped both 40 -- more than 40% both year-on-year and Q-on-Q. And on your right-hand side, the chart will show the postpaid acquisition as well as device sales with a drop of around 30% year-on-year and Q-on-Q. Next slide. Slide #10. Now we're discussing on the fixed broadband. You see that fixed broadband year-on-year growth continued to perform fairly well. But if we look at the Q-on-Q growth, which is shy of 4% Q-on-Q, that's a deceleration in the growth, which, in the previous quarters, we've been growing around 7%. And that's mainly on the right-hand side, you see a much slower net add down from the peak in fourth quarter. Fourth quarter, there was also a lot of promotions ongoing, but in the first quarter, we decided to pull out a lot of the aggressive promotion. However, as the impact of the COVID come back, the offering on the work from home package and the competition as well continue to drive the price around THB 399. So you see the soften in terms of ARPU both year-on-year and Q-on-Q. Next slide. This is on the enterprise segment. In total value, the enterprise segment is around THB 3 billion. That's roughly around almost 10% of service revenue. It continued to grow around 6%, but dropped slightly Q-on-Q. Mobile -- in enterprise segment, mobiles do constitute a majority part, more than 70%. That mobile year-on-year continue to grow as we gain more market share, but Q-on-Q drop because of the COVID. Nonmobile, which is EDS Cloud data center, ICT solution, we still have a double-digit growth year-on-year. Q-on-Q, slightly impact. We see some higher demand coming through with the data center of our service. However, certain service with EDS, we'll have some limitation in terms of access to buildings. Next slide, now we show you a bit further detail of what -- how we continue our service during the COVID. In terms of acquisition channels, you see that there is an online store. We, as always, have this online store. We see more and more transaction coming through due to -- also due to the closure of department store. We're still trying to have some pop-up store outside of the department store, helping on that as well, as well as wrapping up in terms of telesales and other business partners in retail space. In the middle there, you see the amount of top-up on prepaid and the payment channel of postpaid. So even though in terms of online -- online is also sizable. Online, in this sense, will also include something that the customers don't need to go out of home, and they can do basically from anywhere, including calling to our call center or direct debit/credit. But then when we looked at all the self-service channels, that's already 70% or 75% in postpaid and prepaid, so mostly will be unaffected from the COVID. So the rest will try to enhance other channels to encourage this top-up and payment. Next slide. So a little bit on the cost breakdown of the first quarter. Just to be -- clearly, that cost of service overall has increased slightly by 3%. That's mostly coming from the D&A. And also, we have our offsetting saving from the TOT cost. So the TOT cost will be see clearly on the line called network OpEx and net of TOT partnership in the gray bar over there. And then on SG&A, it's quite flat as we have some saving on the marketing spending, offsetting with the higher bad debt on admin side. And also, clearly, the impact to the NPAT, which is from the FX loss. As this quarter, we see a very strong baht depreciation against U.S. dollar, around 8% depreciated of baht, and we do carry CapEx payable. We have a policy to hedge the U.S. dollar CapEx, but that can be done partly, not the whole. But -- so a certain part of that left unhedged, we also faced the FX loss. On to balance sheet and cash flow, just to address that because of the TFRS 16, you now see that on the asset side of balance sheet, we have booked the right of use of around THB 65 billion. That incurs from the long-term contract, mainly on the 2.1 gigahertz agreement, which we have with TOT as well as the tower rental and other smaller items. And then almost equally, on the liability side, it is a lease liability of around THB 64 billion at the beginning of the period against the right of use. On to the cash flow, you see we continue to generate positive operating cash flow, that's THB 23 billion. And this first quarter, the cash CapEx was relatively low, around THB 6 billion in small spectrum payment and investment into a JV as well. But overall, we continue to have a very solid free cash flow and net debt-to-EBITDA continue to be on the low side. Last slide on the performance is on the impact of TFRS 16. So you see on the right-hand side of the P&L impact balance sheet we already discussed about, so it's a movement from the network OpEx line to the D&A. So a drop in network OpEx moving up in terms of D&A slightly up on the finance cost. So net to net is THB 248 million impact to the bottom line. So that's presented the net profit of THB 6.7 billion for the year. So that's for the performance of first quarter. We will continue with the presentation or will give some remarks and overview of our strategy around 5G. Khun Somchai?

Thank you, Khun Nattiya. Good morning, everyone. Today, I will give you shortly in the total picture of -- as after we acquired the frequency on the 16th of February this year. I think as you all know that though in our business, the spectrum is very important as our strategic resources. After we acquired a frequency in this year, I think it is a very good position -- the best position for up to the 5G era because of we can secure long-term competitive net, and also we have a royalty of the spectrum low band, mid-band and high band. We can live with it develop best-in-class of the 5G. It not only on the 5G thing that we will do the 5G so with the near future. I think when we have the 5G frequency, we still can [indiscernible] investment and enhance the flexibility. We can utilize our low band, mid-band and high band, not only on the 5G, but on the 4G, we can tell also. Why I said that? Next slide because -- no, no. Number two, because of -- today, the 4G still have the main connectivity over the next 2, 2 years. I think when we invest in the 5G there, we're not only in the pure 5G. Our CapEx of more than 80% of our -- can use the equipment that can use both 5G and 4G. This is the thing that our strategy in this thing. Because of today, our subscriber with more than 17 million smartphone or 55% to 57% based on our softwares. Today, it can really support the 4G service in the handset smartphone, both on the 700 and 2.6 megahertz. This is the thing that we will make us -- can strengthen our 4G quality and capacity to compete also. The thing that I would like to talk to you about the 5G, why we forecast on the 5G. Even today, every investment and investor said, 5G may not generate the short-term level in this period. However, we still need to be the leader in the 5G era because the 5G will bring a new capitalized or the new sort of revenue in the future also, both in consumer side and also in enterprise side. On the consumer side that we are strong today, we still can use our 5G to grow our core today. We can enhance our mobile broadband further and better the experience than our competitor. As you know, in Thailand, some house, [indiscernible] like Ookla or [ we confirm ] as the best network. But there are some small house of the independent testing said the [indiscernible] is the best network that asked. But since last week, all the house in Thailand announced we are the best network because we have the more frequency to do this kind of thing. It's not only for the 800 mobile broadband. [ Our big broadband, ] we still have capacity to do some big wireless broadband to help our [ business ]. More important thing that in the 5G, on the enterprise side, we can grow beyond the core, B2B/B2B2C because a lot of industry need 5G capacity to [ heal ] their business, to renew their core or increase their efficiency of work. So we will have a lot of new things [indiscernible] IoT or some new application-to-held the industry. This will be more new source of revenue in the future. An important thing that I would like to confirm, our investor committed that we have really clear policy to retain solid financial spend. In this period, even we still invest, we still maintain healthy financial ratio, including our spectrum that we spent and also all the investment that we will invest. We will have the net debt-to-EBITDA under 2.5 to 2 -- 3x net debt to EBITDA [indiscernible]. Based on this COVID situation and also after, we can see really clear picture how we can modernize our operation to protect our revenue. And also, we see some revenue segment that we can grow really fast. As Khun Nattiya said, we can fly [ another ] channel that can manage our [ online channel ]. And also, we still have ability to manage our cash flow, even in this really serious situation. However, I would like to comment to you that we are still willing to continue to our investment and also lever our financial commitment. These are all the things that [indiscernible] future that we would like to give to you. I will pass to Khun Hui, as our President, who will talk you more on detail how our network investment for the 5G and 4G can help our leading position, and also what [ kind of ] new capitalize for the future revenue. So off to you to more understand. Thank you.

Thank you, Khun Somchai. Good evening to everyone. I'll be giving a brief of our road map and the plans leading to 5G. As Khun Somchai mentioned earlier, we've reached a portfolio of spectrum since the auction in February of this year. So we have both low band, mid and as well as high band. Low band gives coverage of up to about 5 kilometers. So it provides the anchor band for nationwide coverage. Mid-band, high capacity, low latency and also the 26 gigahertz millimeter wave, which are super efficient for capacity as well as for ultra low latency. So the chart on the right shows the plan in utilization of the 3 different type of spectrum for 5G for the speed up to maximum of 10 gbps for the millimeter wave. For the capacity up to 10x for 4G because of the higher efficiency of 5G technology. Next slide generally shows how we are utilizing the different bands. Today, 900, 1800 and 2100 are being used to provide for both 3G and 4G. 700 megahertz is available this year or early next year. You'll first be using it for 4G. Later, moving it to 5G. 2,600 megahertz, we already started implementations since launch of the auction. And we have 100 megahertz, which we'll be using the full potential for both 4G and 5G. Today, the majority of cities where we implemented 2600 comprises both 4G and 5G. And for the high-band availability of next year, it all depends on the readiness of devices, especially when we roll out in areas of high capacity and high density. The bottom slide shows the refarming of potential spectrum towards 5G. So for the low end, by 2025, probably [ we would be able to refarm ], the mid-band, 900, 1800, 2100 will also be refarmed. On the right-hand side, 5G expected to be mainstream by 2025 as we try to migrate the majority of our spectrum and refarming of the spectrum over to 5G. So currently, 3G, we have about 23% of usage. 4G was 73%. So as we move forward, we will try to migrate 3G and 4G to 5G to fully utilize the spectrum for 5G. Our plan for the 5G will be to have target coverage by end 2020, up to 13% of population coverage. As said today, I think, effective of middle of April, we already have coverage in 77 provinces for 5G, encompassing about 1,400 cell sites. Our plan for the entire year is about 4,600. So currently, we are already hitting 30% of our target. By June itself, with the rollout to 2600 in EEC, we expect to cover 59% of the NBTC required areas for the 5G that we cover. We primarily started with the prime CBD areas, potentially of high 5G adoption and also high data usage and utilization of 4G. As Khun Somchai mentioned earlier, 2600 available for 4G and 5G. As such, to date, of our 30 million smartphones, about 57% of them can be utilized on the 2600 megahertz and about 42% are available for 700 megahertz. The center diagram shows the -- our implementation. We'll be using both nonstandalone and standalone. Currently, majority are nonstandalone, but we have started implementing 5G standalone, and it will be largely also for both Bangkok, EEC as well as the Northeast region. Both users, multiband, multi-technology allowing facility of both 4G and 5G, something that is known as dynamic spectrum sharing. So today, for our [ 500 ] megahertz off [ 2600 ], we are already utilizing 20 megahertz for 4G and the other [ 80 ] megahertz for 5G. Moving forward, we expect that the rollout of 5G to increase quite dramatically because of the estimated decline in the network costs. The diagram here shows about [ 9% ] decline for CAGR. Commercial use cases in both consumer enterprise is still something that we hoped will come, and that will drive 5G adoption in the years to come. And as mentioned earlier, largely technology migration from 4G to 5G because 5G technology is a lot more efficient than 4G technology. Of course, lastly is the adoption rate and the consumer behavior which we think will continue as more and more consumer applications such as AR, VR and telemedicine, telehealth come into play. The current ecosystem have support for both devices and equipment. You see on the top chart here. Currently, there are over 40 models and expect to have 250 models by end of this year. 5G handset starting price currently as low as USD 500, expected to be up about $150 by end of next year. FWA devices are already available with quite a number from Huawei, and we are already testing it for both consumer as well as small enterprise. One of the good applications for FWA is on the replacement of the fixed [indiscernible] for enterprises. So we are not looking at how this could be a complement to the EDS service for enterprise. Statistics globally from the GSMA report, over to 26 million currently for 5G in China, expected 164 million by end of the year. A large number of operators [indiscernible] already having plans or are already providing 5G for the customers. Number of devices, [ expect ] 250-plus with 40 different mobile phones commercially available and ready for 4G -- 5G, sorry. Next, I'll quickly run through on the capital list that Khun Somchai mentioned. So lastly, on the delivering new experience for consumer, expanding market potential for FWA as well as pioneering new digital enterprise applications. We have already started working with partners to bring innovative services to our customers, encompassing 4K and VR. Those are new immersive experience for our customers, something that we hope the customers will experience and will like the new experience. New augmented reality as well as e-sports and gaming with the lowest latency. So we are also trialing Cloud gaming, for which, the latency is extremely important. On the right, when you look at the movements in the past between 2G to 3G, there is an ARPU uplift 3% to 4% as well. And for 5G, expect and uplift similarly about THB 980 per month for the new adopters. On the bottom, there are the some examples from other China Telecom and China Mobile, they've seen our 5G [indiscernible]. Whereas, the operators in Korea sees quarter-to-quarter ARPU improvement on a blended scale. FWA allows operators to expand the market potential for broadband. So we expect that in 2020 to 2021, FWA could be useful in areas where, for example, in condo and villa, whereby inaccessible to fiber or underserved condo currently using copper technology. But the bigger potential is actually in suburban areas. So those will be -- those will allow customers to get access to high-speed broadband without having a fiber. So as the improvements in technology [ goes on ] and in the manufacturing capacity capabilities, so we do expect FWA CPE demand for the both -- as the technology moves on. FWA was -- will be supplementing the faster rollout of the new penetration area. But it cannot -- in the long run, FWA still remains a key technology for fiber still remain key technology, and we expect that in areas whereby have a high concentration FWA. This will gradually be replaced for -- by fiber because fiber, as you know, is actually a point-to-point technology. Whereas, FWA is actually multiple users sharing the same spectrum. On the right, it shows the expected broadband market in -- by 2030, 15 million households in Thailand. We expect to FWA penetration to be about 10% to 15%. This table shows the opportunity for enterprise. We have actually segregated into a -- bottom is the China Mobile for both consumer as well as for executive in enterprise. Mix level is the infrastructure. We have FWA. I mentioned earlier, FWA-EDS. So FWA could be supplement or complement to the EDS fixed line. Very important concept is also the multiaccess edge computing, whereby we are bringing computing and storage capability nearer to the customers. For those applications will require high computing power as well as low latency. Next up, you see product solutions. Currently, we are experimenting remote control applications, digital signage, drones and video analytics. Right at the top, the industry solution, augmentation of all the different product solutions to provide solution to various industries, whether it is smart manufacturing or super factory. So it is a quick summary of the potential for 5G in the enterprise arena. 5G also brings about possible new business model. The slide on the bottom shows the current situation whereby consumer buy services on third party, but using the operators as a bearer service. So there's a billing on behalf, possibly. Second is solution enabler. So third party provide services to customer, but buy wholesale from the operator paying wholesale rates. But the more potential is on what we've done [ at ] whole creation. So whereby, the operator will work with third party to co-create new services. So there will be a better value-add than the normal either bearer services or just the billing on behalf. Okay. So with that, that ends my presentation on our road map to 5G. So now I'd like to hand over to Khun Tee, our CFO, to explain on the 2020 outlook. Thank you.

Good morning. I think 2020 will go down as a [indiscernible] in history, and that -- it almost make the world stop spinning. I think nobody knows what's going to happen next. But for sure, one word that we can use is, it's going to be a challenging year. I think, for us, we still feel confident that we get -- we can get through this unscathed. However, we also need to be a bit mindful in terms of how we go about doing business as well as to be very cautious in making investment. So in terms of total economy, I think you all may know this better than us, but we do see a contraction in GDP and a lot of houses come out with the new range of GDP contraction roughly. Now it's minus 5% to up minus 10% or minus 8%. I think, for us, we also -- in the past few years, we have been, as an industry, tracking quite close to GDP or at least in the same trend. And if you take away the specific industry issues in each of the year, normally, AIS, as a market leader, will be able to perform better GDP in a range. It depends on the year, 1% to 3% above GDP. So mainly because now mobile services or telecom services has become a part of infrastructure for the whole country. So I think if the whole country is not doing that well, then it's -- we also need -- we'll perform more or less in line. But as a market leader, we have a lot of factors that we can manage and also try to grow the business. But as far as an outlook for this year, I don't think we'll be giving normal guidance as usual because it's too many uncertainties. So we'll give you basically only one number is what we plan to invest in the CapEx. Apart from that then, it's more general trend that we feel it is happening now. For example, on the mobile side, we see a bit of a pricing pressure, given the economy is not growing and a lot of growth engines has been cut off. For example, tourism as well as the export market or even the drought that's going to impact our agricultural sector. So we do see a bit of a negative trend on [ ARPU ], and I think you saw that happening already in the prepaid segment because I think that's a lower segment on the spend. So they feel the impact first. On the fixed broadband, we also see a lot of competition in terms of increasing the speed and partly in giving a discount at acquisition. So we do see a bit of a pricing pressure on ARPU as well. But the sub, it's actually increasing quite okay. On enterprise, it's -- one on the overall mobile. We do see some increase in certain sectors. But as we know, a lot of industry is also badly impacted by this COVID. So there are people that reducing -- enterprise that's reducing the spending or the usage of the mobile. But on the solutions side, we see more growth in that area. A pocket of growth in Cloud, in D.C., in cybersecurities. So I think we will reallocate our resources to capture all those growths that we see in the market. And I think as everyone expects, COVID impact is going to be throughout, at least, this year until we can get a vaccine. So the partial lockdown will continue, and hopefully, I think lately, we have good -- very good progress in terms of controlling the infection in the country. Hopefully, once we open up the economy or the activities, then we don't need to have a second lockdown from the second wave. But with that, we see some impact from the public measures that we should support. I think given the economy is not doing that well, so everyone has to [indiscernible]. So we do see some impact from the support that we need to give to society. 10 gig, 100 up speed for FBB. 100 minutes that start in May, but I think all this impact, we can cover, so there should be no issues in terms of supporting the government on all these assistance. However, with the weak economy and consumer spending, potentially, there could be a rise in bad debt. But from what we track so far, it's still in acceptable range. And then there is some delay in payment from some of the enterprise consumers as well as the postpaid subscribers. Anyway, on -- even though the revenue may be challenging, we also want to make sure that we can deliver profitability to our shareholders. So we have looked at ways to minimize or optimize our cost. A big one as we mentioned earlier that we optimized or try to make the CapEx so that we make this year will be most efficient. So we're going to look at ways to invest in both 4G and 5G to make sure we can curb with the increase in traffic, but also to be able to use the CapEx that we invest this year for the longer term. Net operating cost and everything, we need to look at how we can relook at the site to make sure that we get sufficient coverage and also capacity. Clearly, the trend of usage in different areas have changed because of people have changed their mobility patterns. So we adopted that. We also have to negotiate with vendors and the landlords to help with you with the expense. On SG&A side, I think on marketing spending, for sure, we can reduce the spending during the low activity period. But when come back, then we will start spending back to gain market share again. On headcount control, we put in better control on headcount for sure because now we work from home, shop virtual and all that. So there are new ways that we can actually operate the business at a much lower cost, and that will have a long-term positive trend to the industry as well. And if things got worse, we have other measures that we can actually pull out and have additional cost savings. Next one is, it's basically -- we just want to show that CapEx for this year, it's roughly going to be THB 35 billion to THB 40 billion, and that include 5G. So -- and the portion that we invest in the 4G -- pure 4G will try to be minimized, will increase -- we invest in 4G to increase certain capacity, but the equipment will be 5G ready. So in the future, there will be a refarming of the spectrum that currently being used for 4G into 5G. So all that as well as the 5G equipment that we invest this year, we'll be able to work on the 4G technology as well. So you get the best of both worlds. But I know that the amount of investment may seem large to investors. It is mainly driven by 2 reasons: one, because a cost per site -- cost per equipment, for 5G equipment is higher than 4G on a per equipment basis, but the 5G equipment can deliver so much more capacity. So you divide across the capacity then it will be much cheaper. But anyhow -- so in the beginning, the cost of investment per site is a little bit more expensive than 4G. Longer term, we also expect the cost will be coming down over years. The right-hand side is the payment profile of the spectrum. So this year, we're going to have a payment to make -- to be made for about almost THB 29 billion. And -- the following 10 years after this, roughly, it would be about 10 to 14 for the first 5 years and then [ after that, ] be less than THB 10 billion per year. So with this profile of spectrum payment, then we should be in a very good position to deliver our dividend to shareholders and keeping the borrowing ratio to be at a healthy level. Next is, just wanted to reiterate that we're still having a very healthy cash flow from operation. In the first quarter, it's then THB 20 billion and in net cash, it's around THB 11 billion that we increase in the cash position. So by the end of the quarter, we have roughly about THB 30 billion on hand. We may need to increase the borrowing this year, mainly because of the spectrum payment. So apart from that, we should be able to internally fund both the CapEx as well as the -- to pay out the dividend as we have a policy. I think Khun Somchai already mentioned net debt to EBITDA, I think for us, we still have room to lever up quite a bit to cover all the extra needs if we have to. Next is, I think, as a company, we are also preparing for the new normal after COVID. For sure, we have seen customer going more digital over the last 6 weeks. My AIS application has been a one-stop service, has been utilized much more than before because enhancing our AI chatbot to serve customers on a more personalized level. Or the indicator of our kind of digital services has been on the rising trend, I think that's in line with everyone else in the world once when the physical channel is being shut down or being closed. Anyway, going forward, then we need to look at how we optimize our channel strategy because I think the new world may trend from the old ones. Also, we need to be prepared for the solution. [indiscernible] both on the enterprise and SME customers because the way that they do it [ business ] change as well, as well as the [ digital ] brand that may have certain needs for a certain group of consumers. So we're going to be prepared for that. As well as in the last one is, we have some -- a lot of people will change the way they work. So we want to be able to service those people as well as changing the way we work as well. We're looking at maybe a portion of workforce continue to work from home. And then the work from home will continue at least for the last -- for the next [ 4 ] months until everything goes back to normal, but the new normal may not be the old one. So I think we'll be ready to capture all those opportunities in the future. I think that's all from us.

So now the floor is open for Q&A session. We have asked today in the meeting, we have 2 channels: the first one is Teams, where most of you are joining; and other one is dial-in calls. In this meeting, we will start from questions from Team joiners first, and then we will go on to dial-in calls. For Team joiners, if you have questions, please type in your name and your company name in the meeting chat to reserve your spot. When it comes to your turn, we will call out your name and you can turn on your microphone to speak. So the first question, we will start from Khun Pisut, Kasikorn Securities.

Can you hear me?

Yes, we can hear you loud and clear.

I have 5 questions. The first one is on your service that you presented that in March, the service revenue fell with what? 4% year-on-year? What was the last number in April? And what will your monthly revenue start to normalize or even pick up on a year-on-year basis or a month-on-month basis?

Shall we go one by one?

That would be great.

I think that the trend -- because as we all know, the lockdown starting to happen in the last 10 months -- last 10 days of March. But the -- I think that the fear was actually since the early March. So that's why you saw a minus 4% on a year-on-year basis in March. In April, I think the trend is still the same. We feel the same kind of impact level as in March. The issue is, in May, with 103 minutes, it really depends on how much people will slow down in the top-up in the prepaid to how that will replace the 100 minutes. Because we won't get any conversation based on those new measures. So for me, it's anybody's guess right now. We do hope that the bottom will be in the second half. The second quarter of this year, it may trigger into the third quarter a bit, but in the end, I think, hopefully, by the fourth quarter, then we can start to grow on a quarter-on-quarter basis. I think that's the best case for now. On a month-per-month, it will be tough to guess which one will be the bottom. But I think in terms of quarter 2 and quarter 3, for me, it could be kind of [indiscernible], and then we'll start going back in the fourth quarter.

Okay. My second question is on the broadband business. As you mentioned, the demand has emerged in late March. Can we expect a pickup in both net add and ARPU in the following quarter? And at what magnitude?

Yes. Thank you. So for late March and in April, we do see a increase in pick up for the fixed broadband as to whether the churn, we also do see some churn because of the reduction in spending. So some of our customers are also -- think out of FBB and into mobile data. Moving forward, depending on the lockdown, we will need to see the extending service. Even in April and March, for customers who request for FBB, we also do face problems because when our installer wants to go to a home to install some of them are quite wary of it. So some of installation time period takes longer because you need some preparation itself.

Can we expect some ARPU uplift? I mean ARPU will recovery in the second quarter. As you mentioned, you will stop cutting the price since the first quarter.

Our plan, in fact, for early this year was to try and increase or rather uplift the ARPU by taking away some of the low price plan. But unfortunately, the industry did not follow the lead that we took -- in February, March, we had to introduce some of the low price plan. And in fact, the industry is getting more competitive recently. So [ C3 ] will be having the 1 gig plan. I think, today, the -- this announcement by the ministry that they will be collaborating with TOT and CAT to offer the THB 390 with 100 meg down and 50 meg up for 12 months for the public without paying for the first 3 months. So the impact of that, we are yet to see, and we will respond accordingly, depending on the take-up by the different -- by the customers on the different price spend. Obviously, we're trying to increase the value of our packages by not competing just on price, but offering other value-added services such as our AIS PLAYBOX.

Okay. My third question is on the cost side. What will be the cash cost item that you should be able to manage in order to maintain your profit level for the rest of the year?

I think there are a few items that we can try to manage. One is on, for sure, marketing and subsidy. I think that really depends on situation in the market as well as the economy in general. But it really depends if we see that whatever we spend doesn't give us good return, and we can hold back on that and/or we can change the way that we spend it. So I think that's one [indiscernible]. Second one, I think, one, when we invest in the 5G, then we would try to look at some of the optimization on the 4G equipment that we have. It really depends on, I would say, the traffic flow as well. So for me, there is a way to optimize the utility cost and be operating the M&A and now that the maintenance, that part as well. Lastly, I think it depends on the footprint of the physical jobs as well how we can open back up, and how are we going to style people in the channels. Those are something that we can also do as well as the call center that we have. Once when we change the way we operate the call center, then potentially, there is cost to be managed because we may allow for, I think, more flexible hours, shorter hours, those type of things. So that will help with the turnover rate of the agents as well as we don't need to pay as much. We ask them to do a longer session.

Yes. That will be one of the main items, factors that we take in account. For the call center, it's especially important because we do see high termination, and we're having work from home, we hope that this will erase the problem by not having to travel to office and being able to start early in the day or [ flexi ] hours and so. And so that will improve the work/life balance of our call center [indiscernible] professionals. As you know, it's quite taxing on the call center in service. So you hope that working from home will give them a lot more flexibility. Regarding the maintenance itself, now we're also improving the way that we manage the maintenance of our base stations. So instead of engineers moving out from their station to fix any problem, we are now looking at deploying them from, in fact, from the home itself. So when they move to the area where the problem is a lot shorter and also having a lot more spare part being distributed across the country so that we reduce the traveling time and improve the efficiency. So even like for base station itself, now they don't use the key -- physical key to open the station or the cabinet. We are using the technology. So they use a scan code or use mobile to electronically open the cabinets and the stations.

Great. My fourth question is on the 5G. How much was the 5G adoption in first quarter? I understand that you have launched the 5G service already. And what will you expect to have in the end of the year and also next year?

For the first quarter, we just launched in February. So the pickup is still low largely because of the availability of the handsets. So currently only the HUAWEI P40 and the Samsung S11. For the [indiscernible], we expect -- we estimate about 100,000 for next year, about 1.2 million take up. So that's our plan moving forward. But as I mentioned earlier, it depends on the availability of handsets and also on the availability of the consumer applications. We do hope that the enterprise will make a bold move, and now the industry will see how they can take advantage of 5G to improve or help in their operations.

Yes. And my last question is on your presentation, Page 32. Could you please explain what the meaning of dark green and light green representing, I mean, on the CapEx? Page 32.

It's just -- I think we tried to represent the portion that it's 4G and 5G. The 4G is a light green, right?

The 4G is the light green, guys.

The 4G. I think the 4G is still the darker green. Maturity of the CapEx is still on the 4G, but it's the 4G equipment that we can continue to use in the 5G technology. But they just want to show how much is actually for the 5G that everyone can see. We're still starting out building, as we mentioned, we try to build coverage in the beginning in the major area first. Even though, we cover all the provinces, but it's not the cover nationwide like [indiscernible]. So it will be key areas that we want to have a 5G coverage in the beginning. And as mentioned, the cost per site of 5G is higher than 4G. That's why in the beginning, we need to be selective in the areas where we want to cover with 5G network.

Just to add some color to that. Because early in the year, before the auction, so some of our 4G on existing spectrum. But once we got the spectrum in February, all our 4G hands [ for ], we actually moved to 2600. And we look at the -- implementing the 4G on the existing -- on 5G equipment, we do see that there is actually improvement in terms of capacity for the same number amount of spend. Moving forward, so as we mentioned earlier on, both the equipment for 5G can cater for both 4G. And the beauty of the 2600 is that there are a lot of handsets already that can cover 4G and 5G on that spectrum. So we mentioned earlier, about 57% of our smartphones already can handle 3600; and for 700, about 42%. So the 2600, in fact, is a very good spectrum for us in that. We can actually use it for 4G, 5G and a large percentage of the current smartphones already operate on the 2600 as compared to 3500. Currently, I'm not too sure whether there are any handsets that can cover 3500 on 4G. So 3500 largely here for 5G, but the 2600 are for both 4G, 5G. Majority of handsets out there, as mentioned, 56% of our handsets cover both 4G, 5G -- covers about 3600.

So the next questions will be from Khun Thapana, TISCO.

This is Thapana from TISCO. I just want to follow-up the 5G, 4G CapEx question that could be -- asked earlier. So I understand the MD&A, you mentioned that the planned 5G coverage is about 13% of the population by the end of the year. And I understand that in that chart, you mentioned that the light green would be the 5G CapEx and the dark green is 4G. So am I right in saying that the 30% coverage would come as a result of that light green bar investment, which I guess is about THB 10 billion? Or is that 13% basically the entire bar because eventually, that 4G and 5G, they're all the same -- mostly the same equipment anyway. I just want to ask that first.

I think I'm not sure whether we understand your question correctly. But when we mentioned that we're going to cover 13% of the population by year-end, that based on the 5G coverage alone. And I think what we show here is the 5G portion is the lighter green. So let me just clarify it. When we were launching 5G over here, we mentioned earlier on that we are first targeting at the area whereby we have high 4G usage. To expand capacity on 4G, we're also using the 2600 for both 4G and 5G. So in order to have a good 5G coverage, we're also expanding it outside the clusters. So what it means that majority of the 5G -- or rather the dark green and the light green are for both 3G and 5G. And the light green is only specifically for areas where we do use it for 5G.

Okay. I see. So -- yes. Okay. So that's -- so it's fair to say that 13% coverage for 5G is pretty much the majority of that bar, given that the dark green is also a combination of 4G and 5G?

Yes. Because majority of the 5G offer 4G.

Okay. Then that leads on to maybe my next question. I think you mentioned that the cost per...

Rather, let me just clarify again, Khun Somchai earlier mentioned that 80% of our 5G investments are for both 4G and 5G, so we are investing for 5G. We are also taking into consideration 5G, right? So the light green one or the percentage is quite small, I think, about 20%, 30%, which are specifically for 5G in those areas whereby we want to have contiguous 5G coverage. I hope that clarifies the thing.

Yes. Now I guess leading on from that question. And I think you mentioned that the cost -- the investment cost per side is quite expensive. My next question then is, am I right in saying that the bulk of the investments, including the 4G, 5G concurrent cell site as well as 5G stand-alone, the reason why they're so expensive is also because you are investing in the Massive MIMO cell sites, which tends to be several times more expensive than the normal passive antennas that we usually see for 4G. Is that the right assumption?

Can you repeat that again, sorry?

Yes. So am I right in saying that the majority of your 5G investment, stand-alone investments as well as the concurrent 4G, 5G cell sites that you mentioned earlier that the bulk of these cell sites tend to be the Massive MIMO type with the active antenna, 64x64. Is that the right assumption as well? Or is it more of a mix of the lower-end passive antennas more so than the high-end antennas?

Yes, you're right. We use both 8x8 as well as 64x64. So we're using the high-end antenna. In fact, just the last few weeks itself, we actually started a Massive MIMO, and we do see an increase in the capacity from the 2600. So that was actually the right direction for us. So investments in Massive MIMO 4G, 5G on a 2600 does -- do increase the capacity for us for the CapEx spend.

Okay. And then I guess my follow-up question on that and my last one is that I understand your competitors is also investing in 5G, but they may be doing more of a segmentation strategy where they focus more on the passive -- the cheaper passive antennas and then just only putting up the Massive MIMOs for areas where they really need it to conserve -- to preserve their ROE. So am I right in saying that AIS is investing quite heavily right now, given that you're trying to create a big competitive advantage for just the competitors. And also, should we be expecting AIS to do more front-loading of 5G investments in the next couple of years to increase that competitive advantage? Is that a right interpretation of this CapEx number?

I think maybe next time we should invite our CTO to come in as well. From what I know, I think the way they design -- our main competitor, when they design the 4G network, they already invest a lot in the Massive MIMO technology for 4G. So I think for them to redouble the effort into Massive MIMO again in 5G, I think it's like a waste of money for their 4G investment. So that's why maybe they take a different approach in that. I think for us, we took a different approach and we designed a 4G network. So I think for now, our 5G network, we can do a lot more on the Massive MIMO. And because, we -- the way we have to cater to the demand of our 4G traffic, we can design our network to be compatible with the 4G users as well. So that's why you say whether we front-load in the spectrum of 5G, I don't want people to think that we invest, but we cannot utilize it. It has the history behind why at this stage, we can invest in for 5G with Massive MIMO technology at this point in time. Firstly, I think, because it complements with the 4G technology that we have. Second, we capitalized on the 5G capacity initially based on the 4G traffic. So I don't want you to just compare just investment numbers and -- because the situation is quite different. But I'm not the best person to go through in detail with these technical issues. So if you don't mind, maybe in next round we can invite CTO and then he can clarify a bit more, but he can also confuse you a bit more as well.

The next question will be from Arthur, Citi.

I have 3 questions, but I'll ask them one by one. Firstly, on the 5G CapEx, how confident are you that you're actually able to monetize this on the bottom line over the next 2, 3 years? When I look at your approach, it seems far more aggressive versus peers. Not only did you spend far more on spectrum, you're also spending far more on CapEx or maybe others are actually looking it to be flat. Do you see the 5G revenues as actually compensating for the added DNA and spectrum costs and financing over the next 2, 3 years? This is the first question.

Okay. It looks like the one is very concerned for it to have a 5G investment. I think for us, we have to monetize -- to be able to monetize. And now I think it partly depends on how we develop the industry as well. A lot of time when the new technology comes, it takes a bit of time to actually get to a growing stage. I think for us, we want to take the leadership in this to build the 5G infrastructure out. But as mentioned, we selectively -- that's in the area where we feel we can monetize. So I think why we are doing that, partly because, as I mentioned, if we invest in the 4G now, it won't be utilized in 3 to 4 years from now. So all this extra currency that we need for 4G right now, we turn into investment in 5G. And if we invest in 5G now, as I mentioned earlier, even though the cost is a bit higher, but we get at least 5x the capacity, and it can last longer. That's why in the beginning we do not hesitate -- you want to invest in 5G in the key area that we know we can utilize for long term, then we are willing to invest. Even though if you ask about whether it can get to a monetization in the next 2 to 3 years, we say yes, to a certain extent, but the thing we don't see is if we don't invest in this 5G, then we can -- we have to invest in the 4G, but the 4G won't last you 5 years because I think after next 2 years, then I think the handsets for 5G will come down to a level of USD 100 per handset. And with that, then hopefully, there will be a big shift from 4G to 5G handsets. And at that time, then the traffic of the 4G network will slow down a lot. So we want to invest in the commodity that we can utilize for 5 to 10 years. I think that's the reason why we're doing it now.

Let me just emphasize again. I think the point that we mentioned earlier may not have been well understood. We mentioned the 2600, so when we invest in 5G or 4G, it is the same radio equipment that we are putting in. So for a start, the equipment that we put in for 2600 can support both 4G and 5G. And the beauty is that 57% of our smartphones need LTE the 4G can support on the 2600. So whatever investments that we put in today is not just for 5G, but it's also for 4G. And it's in time to come when the customers migrate away from the 4G equipment to 5G handsets. The same radio equipment can be upgraded to 5G without any additional CapEx. So you have to see it from the length. So when you ask whether the 5G CapEx, can we remonetize? I would like to think that the 5G CapEx that we put in today, we are monetizing it using 4G data as well. So when we turn on the 4G LTE today, we do see almost about a 20% to 30% increase in traffic in some of those areas. So there's a lot of positive uplift, and it has also help us to ameliorate any capacity requirements that we may experience today. It's different from a case by -- you are implementing 5G on the specific 5G spectrum and handsets only supporting that. And the majority of headsets cannot use that 5G CapEx that we have invested. It's a different situation for us because of the 2600 -- support of 2600 4G handsets.

Understood. Second question I had is with regard to the balance sheet. It seems like the prior gearing range or comfort levels was 2 to 2.5x. Now this has been raised to 2.5 to 3x. Is this owing to expectations of sustained elevated spending beyond this year? I'm just wondering how long the CapEx should be elevated.

Yes. I think partly it's also catering to the new accounting practices as well. Because we raised the criteria a bit, mainly 2 parts. One is we do see a bit of increase in CapEx for the shorter year -- short term. And so we also try to make sure that once there's a change in these accounting practices then there will be more liabilities on the balance sheet we need to book, so we want to keep some room for that.

But that's actually a wash, right? Because then your EBITDA also goes up because of the accounting.

Right, right. But just want to make sure we give something that it's still in line with investment plans in the ongoing situation.

Okay. Last question I had is with regard to the first quarter numbers. If you look at the momentum versus your competitor on a quarter-to-quarter basis, particularly on prepaid, AIS seems to have lagged a fair bit. I'm just wondering what's driving this difference in the first quarter. Is there any difference in market positioning? Presumably, the COVID impact should have been the same for everyone.

Arthur, I think maybe it's just analyzing that for you. I don't think we can give a concrete -- but if we look at DTAC revenue mix, right, around 6% of the revenue coming from postpaid segment, which generally we know that the customer base are more concentrated in the urban area. Whereas for AIS, we have a very wide base, especially on the rural and lower end customer. So majority of our revenue still coming from the prepaid segment. That's one thing. Second thing, we also have a fairly large tourism segment. We have been one of the very first in introducing what we call, I think, even, after operators, customer also knows us very well. SIM2Fly, that is a big segment for us. And also maybe lastly, on the point, if you look at the trend of the revenue, our revenue trend started to pick up last year in March. Because if you remember 2018, we were facing the drag in terms of revenue due to the unlimited plans of postpaid and later on in prepaid. Beginning of 2019, we started to uplift price on both postpaid and prepaid. Actually, March was an uptick of revenue last year. And then versus, if you look at DTAC, the first quarter of '19 was actually the bottom, and the revenue started to pick up afterwards. So that's just our analysis.

Understood. I was looking at it on a Q-on-Q basis. But it seems like it's possibly because of the greater exposure in the upcountry areas, as you had mentioned.

The next question will be from Khun Piyush, HSBC. [Operator Instructions]

This is Piyush from HSBC. Congrats on the robust performance in a tough environment, and thanks for the comprehensive presentation. It is very useful. Three questions. Firstly, could you talk a little bit about outlook on price competition? Do you think structurally, unlimited data plans would remain a permanent feature now in 4G? And probably 5G transition could be an opportunity for industry to reset and move away from unlimited plans? Secondly, on CapEx, are there any disruptions from vendor or physical rollout issues which could affect your rollout plans of TBH 35 billion to TBH 40 billion? And thirdly, you mentioned 5G cost per GB is lower than 4G. Could you share by what factor or percentage it is lower?

Competition. Okay. First question on the outlook of competition. We started to see this unlimited price plan coming back toward the end -- actually, around the end of last year. And also kind of on and off with additional offering on 3 segment with the voice, unlimited voice, coming on and off, sometimes offering on network, sometimes offering only on net. Given fairly weak economic situation right now, we believe that it will be a difficult situation to uplift the price. So we might continue to see some pressure in terms of unlimited plans for a while. However, I think our standpoint is always clear. We're always trying to find the opportunity to uplift price where we can. That depends a lot on the situation in the market. So I don't think we will label it as a permanent situation. And of course, when we go into 5G, we want to alleviate from selling us the data plan. Actually, even with 4G now, you see that we discuss a lot around value-added services, but it does take time to increase in terms of scale and the monetization.

Let me just take the third question on the 5G cost per GB. That's also depending on lot of factors such as the type of number of sectors and the number of TR requirement. Well, for the initial phase that we have based on -- it also depends on the cost that we get from our vendors. Currently, for the initial fleet that we have, for the same dollar equipment, the capacity is about 3 to 5x. And obviously, as the years goes by, that will improve as we improve on the technology and on the equipment itself and also the pricing itself. What's the second question? Can you repeat?

Any disruption from the vendors in terms of CapEx rollout? I think the answer is no. Right now, we expand on plan.

And any kind of physically rollout issues from contractors, et cetera, to roll out or there is no disruption on that side as well?

There's only a very slight impact. But overall, there's no disruption on our program.

The next question will be from Wasu, CIMB.

I have 4 questions. Maybe we can go one by one. The first set of questions is about consumer behavior during the COVID outbreak because AIS has a number of work-from-home and work-anywhere packages. I'm just wondering which packages have been your customers' favorite in both mobile and home broadband segments. And also, could you please like clarify, like, do you see more take-up in mobile and/or home broadband for these types of packages? That's the first set of questions.

We do see pickup in many of the packages, but this has also been clouded by the 10 gigabyte free given by NTC. And so we do see quite a huge take-up as we shared in our report, about 8.7 million of our customers took up the 10 gigabyte. And a surprising thing is that we do see very high usage from 10 gigabyte. So currently, more than 50%, rather more than 50% to 60% of the free data has already been dumped by customers. So we do see some potential there so that after customers use the 10 gigabit, there's an opportunity to upsell. For the fiber broadband, we also see customers taking up the higher prospect, but also customers taking the [ 3 99 ] package that we have offered in the market.

Sorry, you mentioned 8.7 million, right? It's right in the slide, right, for the 10 gigabyte of the internet.

Yes.

Okay. The second question is about revenue trend, the mobile revenue trend because country's presentation seems to imply that the mobile revenue is somewhat linked to the country's GDP trend. And since most economists expect GDP contraction this year to be worse than what we had in 2009. And I'm correct to assume that this time it's worth for entire telcos in terms of the revenue trend than what it was in 2009 crisis.

I think you need to really look at the factors, I'm not sure, because I wasn't around here in telecom in 2009. Yes. The situation is very different and also the industry state very different. Nowadays, I do believe that telecom or mobile service has become a necessity for people in people's life and also in doing business. So I think it does have a more resilient kind of status when you try to compare with GDP growth numbers as in 2009. And I think the fact of issue in 2009 crisis versus now is also quite a bit different. But I'm not sure that it's really comparable. Here, what we -- what I said or what we said is we do take a notice that a lot of economists forecast GDP growth this year to be around minus, I had mentioned, about minus 5 to minus 7 or minus 8. Internally, we're working on roughly the averages between minus 6, but there are certain areas that is shielded from that. So -- and so we also try to adjust our internal strategy to capture some growth that's still out there in the market. However, given the overall economy is not doing that well, I don't think we will be -- let's say, if economy is minus 6%, I don't think mobile industry can be a plus 2 or plus 3 as we had been in the first 2 months. So for me, we, as a company, as a leader in the telecom market, we still feel we're going to do better than GDP, mainly because there are ways that we can service people during the tough period and that's still some -- business is still on a growing trend. However, with that, then the pricing pressure will continue throughout this year. And I think that's the one factor that may not allow us to have a high growth much more than GDP.

My third question is on the subsidy by the NBTC for the 10 gigabyte of free mobile internet. So regarding the THB 100 per subscriber subsidy, when do you expect to receive the subsidy payment from the NBTC? Is it within this year?

I think there are 2 portions. The bigger portion is on the 10 gigabyte that's -- it's over THB 100 per account. That -- I think in the condition, it's 60 days after the data has been verified by NBTC. So I think after this, then we're going to send the information back and forth to NBTC. So in the end, we still expect, in short, within this year. But for the upspeed FBB, I think the condition is we can deduct that from the user fee we have to pay next year, and the amount is very small. So I don't think that's a big issue for us.

And my last question is on the fixed wireless access. I believe that is -- this is the first player to introduce fixed wireless access on 2600 megahertz spectrum. So since you are a first mover, have you seen any success stories of the fixed wireless in other countries?

I mean there are several stories about fixed wireless access in other countries, especially in the U.S., especially Verizon and all those. I wouldn't say we are already implementing fixed wireless access, but we are experimenting with it. And so we have already important number of the FWA CPEs, and we are also looking at where is the area or the places that most of the bulk were written. So as we mentioned earlier, it could be in those areas where fiber is inaccessible and also in the suburban areas whereby you may not make commercial sense to lay fiber to it. So we are getting all the different regions to estimate where it's the best place to put. And also the case, whereby we do have 2600 implemented in those areas. So it's still early days to see whether the WA is a success, but we do want to optimize the utilization of the spectrum in those areas where we have rolled out for 5G.

Next, we will have questions from Khun Thitithep, Phatra Securities.

I have just 1 question. If you compare your investment, both in terms of spectrum and CapEx, you are more aggressive than your competitor, especially for DTAC. And yet you target to have 1.2 million 5G subscribers, I believe, in 2021. That's not very aggressive. It's less than 5% of your subscriber base. So is it fair to say that in order to justify your investment, you must gain market share in 4G? Is that a fair statement?

Okay. I'd not like to refer to our plan in our call. But anyway, it depends on how you take on the 5G investment that we have decided. Firstly, I think we are not looking at this as a 1, 2 or 3-year business. 5G will stay with us for the longest time, at least, I think, 10 years. So -- and the spectrum that comes, it doesn't come very often. And as you know, and sometimes it's unplanned as well in -- if you want to plan to invest in over the next few years. So for us, we still feel the spectrum that we acquired will give us the right composition to continue to be the leader in the telecom market here in Thailand. And also investment that we are making, if you look at the number why we forecast that next year, internally, it's -- we still feel it's conservative, but partly because when we made that number internally, the handset available in the market is still very low. The key to success of rolling out 5G mobile is, for sure, one thing is where the network is -- cover enough areas, and second is the handset. So we are doing our part in terms of trying to call the network in significant areas that we feel there's growth, there's demand. And 5G, it will not be a story of only consumer. I think for us, we're also looking at enterprise as a key users of the 5G network also. So -- and here, becoming a leader in the Thai market, I mean we need to make that we keep that leadership. And because we still have the financial strength to invest and the way that we decide our network, we're also very confident that it's going to deliver a much better performance over our friends that have low investment in that network. And I just want to let you know that we invest in 5G at the early cycle of the business. So you can't compare it to the 4G that we came in at the later stage of the cycle. Here, in the beginning, if you look around, the first -- I think the first year Apple will target roughly about 10% of that postpaid base to convert into 5G. And normally, there's a pickup in ARPU for 5G versus 4G. So I think that I just want to tell you the rationale why we came up to that number, partly because we're looking at trend, but the trend is a trend that happened last year. So next year that we are looking at, probably the trend will change. So we will keep changing that trend. But as I mentioned, please don't measure our 5G investment based on totally 5G revenue. I think we are using our 5G investment much more than that.

Right. May I have one follow-up questions? When we talk about the enterprise revenue, which year do you think that the enterprise revenue from 5G would be material? I know it's still -- everything is still up in the air. But are we talking about 2021 or 2022 or longer than that. Just a rough idea is fine. I know it's quite difficult to pinpoint the exact year.

Yes. I think for now, what we are making is we're making headways into a lot of industrial area to lay down the necessary infrastructure. So hopefully, once we can secure all those areas. And next year will be the year that we're starting to roll out the service. And to really see any significant pickup in the revenue or acceptance of customers, and I would say, 2022. But next year, then we should be able to give you the feeling, the feedback, which area we service that we get good traction by customers. And with that, at that point, then we should be able to project more forcefully about the future revenue growth.

[Foreign Language] I am Somchai, CEO. I would like to emphasize more in our company strategy based on your question, I understand that our investors are really worrying about our investment on the spectrum and also on the CapEx why in the situation in the market today, the [ revenue ] and also the economy is not pushed today. Like I present in the beginning that this year after we acquired the spectrum, I feel that as -- 30 years ago, this year is the beginning of the year that we have more resources to do our future with that. I think it's like we are in the stock position in the Thailand market. As you all know that we used to know our business based on really low resources, efficiency and the frequency, and we do our bit. We have to push a lot of effort in terms of technology -- technical solution to fly back in market. Today, we have the spectrum enough survive for 3 to 5 year based on county information. As you know, in our regulation in Thailand, maybe not a certainty. If -- what if -- if another 3 to 5 year we will have not the option of frequency, we will survive for sure. You can see our second operator, even they are smaller than us, they also acquired the same amount or less than that, but not much. On the third page, they may think they have the high hope to invest later, but in Thailand, uncertainty, I think we cannot take any risk. On our investment today, like Khun Hui always mentioned that we invest a lot in the industry. It's not only for the short term, but we invest for the short term and long term also. Based on today, if the competition, I think only the key problem today based on the COVID situation that customer we have they had shared and they can apply a lot of neutralized stations. But for competition landscape, it will push up and pressure up and cannot lift up the ARPU today. What if -- the others, they cannot stay for a long. You can see the network also jam today. And also some extra fee from the regulator like 10 giga and 100 minute to call free. After an off that kind of date, customers have the choice, and we have used to do that. If we can lead you the completion, I think the growth is also there. That -- but we cannot locate an estimate by ourselves, but everyone still tied to fight, but the real thing will come up. So this is a team. For the third step that on our investment today, most of spectrum and network CapEx, I think if you can find the new sort of the new life, which we said the new catalyst, today, we invest and work a lot with the industrial area in many, many industries that if it happened, it will be a sort of revenue on the enterprise side. These are the things that we try to invest in the long term. I think, by my hope, we do in the right strategy today based on we are a leader. We have the good position based on our cash flow. And also, we have very clear plan to make it only to think that we need to wait and see, first, in the charter if we can cooperate and the position in the market, not feel like this. It will come up and jump up in our revenue for sure. But I don't have this hope, only this hope, but I have the hope on our Thai customer. We have a -- more consumer and enterprise will apply all these digitalization. It will have another next chapter of our new sort of revenue. That's all the things that we plan.

Now we have come to the last set of questions from Teams before moving on to the last question from Ran JPMorgan. So the next set of questions will be from Khun Prem, Macquarie.

Three questions from me, please. First of all, I can see exactly why you have acquired this spectrum, and I think it's a good strategy. Could you clarify why we have not used more of the 2600 spectrum for LTE services, especially given with all these unlimited plans, et cetera, why not use 2 or 3 carriers and try to drown out the competition, especially those with less spectrum resources? That's one. Secondly, could you give us some feel for the experience in other countries where the Singtel group operates? And what is the willingness, especially amongst SMEs to pay up for 4G IoT services versus 3G? And more importantly, will -- do you think that they will pay up for 5G services rather than 4G, especially when the modules are potentially more expensive? Your thoughts around this would be great. And finally, this CapEx trend, again, I believe that you need to stay ahead of the competition, so good. But what do you think you will spend over a 5-year period in total for your network investments? And also, I noticed that your cash CapEx number is actually only about THB 28 billion or so. So in terms of the vendor financing, are you going to be relying more and more on that so that you free up some of that cash flow in the early years?

Let me just -- I'll take the first question. On the question on why we don't use more of the 2600. As mentioned today, we already have launched 1400 sites, out of [ 4,006 ] by end of the year. Today we're using 20 megahertz already of the 100. And there is sufficient capacity for us to overcome any condition in those high-density area. So if there are more capacity required, then obviously we can actually expand there. And then currently, 20 megahertz is what we are budgeting with the other 80 meg reserved for 5G. For the IOT, yes, you're right, the tick up has been slow. I think in other countries as well. So not much of a huge increase yet. Currently, today, IoT here largely is machine-to-machine for our corporate customers as well as SME. So today, we have about almost 700,000-plus machine-to-machine connectivity. We're currently in the process of also experimenting 5G IoT, which, hopefully, when the large-scale implementation comes about, especially we've sensors in buildings, changing of life or consumers as well for enterprise, then a 5G IoT will offer a huge opportunity because IoT on 5G will have a lot -- can support a lot more devices than IoT on 4G. Last question?

Okay. I think last one on the CapEx trend. It's not easy to give you really the trend of spending over the next few years, mainly because it really depends on how 5G is being adopted. As we mentioned today, that in the beginning, we focus on key areas where we feel there's demand. And there will be a quick demand for 5G. So major cities, central cities, several in the industrial areas. So we will start from that. And plus, those are the areas where we have a lot of key traffic site, high-traffic sites. So with that, I think it's, for us, a no-brainearnings release to invest there. The second phase will be once when, let's say, next year, when we see that the handset of 5G is going to be available, hopefully starting from less than $200 a phone. Then how fast it's actually catch up. If it does, then we'll roll out more. I think a lot of people are afraid of whether we can monetize those investments in the near term. For me, there are 2 scenarios. One, for people to pay up. I think there are a certain amount of people to be able to pay up for additional services or usage. But the majority -- it really depends because it's just upping the speed, but using the same application. I don't think the consumer will pay us a premium for that. For us then, it's on our shoulder to be able to deliver new applications, both to the consumers as well as to the enterprise. If we can successfully do that, I think later on this year, you will see whether we are, how those contents will give experience enough for customer to pay up, opt in the 5G solution that we offer to enterprise, hopefully by end this year or next year, it can actually help them increase efficiencies, of course, then we do have a leeway to actually increase the service fee. If -- what we can offer in the 5G in terms of speed, right? The good thing about speed for us is, with the 5G network, we can cater to service to a lot more traffic. So that means once we invest in the 5G this time, then we should be able to offload a lot of traffic into this network without having to increase more. So for me, it's really a fluid situation where we can balance the growth and traffic once when we have a decent size of 5G network in Thailand. To be able to monetize that or not, it really depends on the application. And for me, the monetization can come in 2 ways: one, in additional renewal; the second, in saving of future CapEx that otherwise we would have to invest if we don't have this 5G that can cater to a lot more capacity. So it -- I cannot give you a clear answer that they're going to be elevated or is going to be reduced. But for us, we're looking at the decent amount that we feel is going to keep us advantaged over our competitor because for sure, we are in a much stronger position to invest in them. But second, we also make sure we get some form of return from this investment. So it won't be useless investment for sure.

I think now we are taking the last question from Ranjan over dial-in. Ranjan?

I have 2 broad questions. Firstly, you talked about the change in consumer behavior with the acceptance of more digital channels. So do you see that consumer behavior is changing permanently so that you can drive efficiency by maybe shutting off some of your off-line stores through this COVID crisis as the online channel becomes more widely accepted? The second question is on 5G. I mean we spent a lot of time, and I apologize if I missed this. But can we realistically expect 5G to give you a premium pricing in Thailand? Because in a number of countries, we have seen that 5G has not been priced at a premium. But in China, it seems like you do have a set of advantage. So how should we think about 5G pricing going forward?

The first question on the changing user behavior and how it might affect us in terms of our stores. Yes, it's a very good question. In fact, during this COVID period, we do see change of customer behavior, and we have also reacted by having a lot more online channels. And we see that, that's actually an opportunity for us that we would also hope that a large proportion of customer will continue to use the online channels after the COVID situation subsided. So yes, we are planning to have a lot more of the online channels. And in fact, not only just sort of improving, such that we will be able to handle a lot more of the customers and also improve on the efficiency, for example, mentioned earlier was actually the call center. Second one is also all the online channels. So after the COVID situation has subsided, we will continue with a lot of the existing implementation that we are doing online. On the 5G pricing, we are still debating what is the best pricing methodology to use for 5G, whether it is going to be similar to the 4G or to -- or the price at a premium. So there's under deliberation. And we're also looking at what other countries are doing. In some countries, pricing at a premium. Others pricing at [ part and parcel ] of all 4 and 5G integration. So we will let you know when we will publicize it. Once we have actually made a decision on how we should be pricing.

I think just to add on that...

One quick here -- so at least 1 quick follow-up. Without pricing 5G at a premium, can we actually expect ROICs to improve? Because you're spending a lot of money on spectrum and CapEx. So now premium pricing, can we expect ROICs to improve?

Okay. I think in terms of pricing, it depends on a few factors. For sure, I think different countries who have different factors that they need to take into account for sure, and one is whether there's a quota, more quota pack or especially unlimited pack. Second, I think whether they have a natural process to actually give people the additional value. So if we can -- it depends on each country because competition is in both, it's not the same. So I think for us, we are looking at, right now, a way to see the increased speed with certain applications that can help justify for the initial premium that we can offer to consumers. Initially, the people that move to 5G adoption in the first phase will be more of a high end -- mid- to high-end consumers. And those who have ability to spend. But it just won't be big enough. So once when we trigger down to the mass layer, mass segment, it's really where we need to show additional value that we can give to them. Otherwise, then it'll be like you said, if we need to price at the same as 5G, whether it's a good investment that we are doing now. For me, it's still good in the sense that we can deliver the service at a lower cost, even though we have some as a higher upfront investment because as we mentioned many, many times on this call, the cost per capacity for 5G is actually much cheaper. I think Weng Hui gave you a little bit of a hint that based on the same dollar value, it's at least 3 to 5x more capacity. And you know that we have been -- we have had to be dealing with increase in traffic throughout our networks. And every year, every quarter, you guys ask whether -- do we need more spectrum, how we'll be going to hit the wall once we reach the maximum capacity of 4G. It's actually now 5G is a time that we can actually unlock all that with additional spectrum that Khun Somchai mentioned. Actually, I want to quote a word of our consultant. He said, because we acquired all those spectrums, we are actually okay for the next 10 years. We actually don't need any additional spectrum to service the demand unless we feel that certain spectrum would give us more advantage. So I think that's to be seen. But just to convince everyone in the spectrum decision that we made is actually one. At least, it's -- we can't grow our destiny now over the next 10 years. One of our friends that they are bidding on the next auction to come, which I think if the other 2 operators don't need, then you'll see what's going to happen. Lastly, I think if we can't price it above the 4G level, then we're going to look at this as we already unlock our traffic issue in the network for the next many, many years. It's a [ sure ] way to service the rising traffic flow. But whether that will result in a short-term increase in margin? No, no, I think that's to be seen. So I think that's maybe -- if you focus on the short term, then it's going to be a bit difficult to look at our investment. But I want everyone to look beyond the next year or 2 years. I know that it's tough because everyone is focusing on the delivery of quarterly earnings quarter-by-quarter. But I think for us, we try to look more long term and try to build and develop the industry into the right direction. And we try to make or take the lead in developing the 5G market as well.

Thank you, Weng. Well, it's a very long session today, but we really appreciate all your attention and thank you for making the effort to join us on this first Microsoft Teams meeting. I'm sure you -- some of you will continue to have some questions, please do contact our IR. We already started to see e-mails coming in. We'll continue to work full time. So even though we're not at office, we transfer all the office line to our mobile number. You can call us from office -- to our office number at any time. And have a good weekend. We hope you all stay healthy and well. Thank you. See you next time.

Thank you. Goodbye.