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

Good morning, everybody. Thanks for joining AIS Second Quarter 2020 Results Conference Call. I am [indiscernible], Investor Relations Manager. I would like to introduce the management team joining us today: Khun Somchai Lertsutiwong, our CEO.

Good morning.

Khun Hui Weng Cheong, President.

Good morning, everyone.

Khun Tee Seeumpornroj, CFO.

Good morning.

And Khun Nattiya Poapongsakorn, Head of IR.

Good morning.

We will begin with short brief on our financial and operational performance and then Q&A session with our management team. [Operator Instructions] Full impact from COVID-19 hit our performance in this quarter. Service revenue got affected from sharp decrease in traveler segment and from NBTC mandate on free data and voice. But we have seen some pent-up demand after lockdown have been lifted in late May. Mobile competition slightly improved. The industry could uplift price for fixed speed unlimited with additional price increase of THB 5,200. But fixed broadband competition was still intense with 299 package. We continue to deploy 2,600 to roll out in high-usage area and had completed rollout requirement in EEC area already. With our effort to optimize and manage cost, EBITDA for this quarter still maintained flat. For second quarter, core service revenues dropped 6%, mainly from weakened mobile revenue. Prepaid segment continued to lose up from tourists. Postpaid side rebound from pre to post migration. Fixed broadband record high subscriber gain of 110,000 subscribers and delivered 22% growth in revenue. On bottom line, net profit declined 7% from decline in revenue and higher amortization of new spectrum. For COVID impact, we start seeing gradual recovery trend as revenue begin to be stabilized and improved bad debt. Online trend for both prepaid and postpaid continue to increase over 75% of top-up and bill payment value. In summary, with well contained situation in Thailand, if they'll be able to maintain this trend and economic activity slowly resume, we expect service revenue to gradually recover in second quarter -- second half, but still declining year-on-year from rate consumption and pricing pressure. Core service revenue and EBITDA expect to decline low single digits for this year. And with low growth environment, we expect CapEx on lower bound of THB 35 billion, still on target to reach 50% of Bangkok population and 13% of the country population. For the next session, we would like to open the floor for Q&A. Today, we have 2 channel to join Q&A from online, on Zoom and dial-in call. We will start with online via Zoom first and then dial-in call later.

First question is from Khun Wasu, CIMB.

I have 4 questions. The first one is about the revenue. So it seems like the monthly mobile revenue already bottomed out in May. So what is the risk factor that might push the mobile revenue to May level again? And what's your view on the outlook going forward? That's the first question. The second question is about the net addition of the subscribers in this quarter because you performed very well in terms of the net loss of subscribers. It came down substantially from the first quarter. Can you give us more color as to why it dropped a lot? That's the second question. The third question is about the fixed broadband ARPU. It dropped 5% Q-on-Q. I think that's the biggest drop Q-on-Q since AIS began to launch the fixed broadband service. Could you please give us some colors on the fixed broadband ARPU outlook in the short term and long term going forward? And my final question is about the CapEx target. So your CapEx target is cut to THB 35 billion to manage the costs amidst the weak demand. Which part of the CapEx did you cut lower than the $5 billion part? Was it from mobile, fixed broadband or enterprise business? And also if the economic situations improve and demand become stronger next year, is it reasonable to expect the network CapEx to bounce back to the upper bound of THB 40 billion in 2021?

Thank you, Khun. Maybe I'll take your question and then management can also add in. In terms of the outlook for the rest of the year, I think there are 2 key factors: Number one, despite that -- the bottom of the revenue seems to be seen already in the month of May, I think for the rest of the year, we all feel that the situation remains uncertain. So we continue to observe fairly weak consumer demand. That's number one. Number two is on the linger on impact of price competition, despite that, there had been some effort in uplifting the price throughout the second quarter, but it's really up and down on the price competition. So for that, I think it would be -- even though we hope to see some rebound in the second half of the year, we don't think that, that will be a major impact, basically because of the weakness on consumer demand and price competition. So we're still looking for a low single-digit decline at the top line. And hence, for that, we are expecting to manage on the cost side to be able to deliver a similar slowdown in the EBITDA level. Your questions around the net adds and also related to ARPU. In terms of net ads, you see this quarter has quite an increase of net add. Partially, we have to say that it also because during the COVID, we also give more relaxed terms to the customer. So some of the customer may not yet be terminated in the second quarter. We might see that subsequently into the third quarter and fourth quarter of the year. That happens on both postpaid and also on the fixed broadband. Having said that, we're also running almost full capacity on the new acquisition installation of the fixed broadband. So yes, fixed broadband continue to see very strong demand from -- of the work from home. In terms of ARPU, actually, both mobile and fixed broadband has seen declining trend of ARPU, and we still have -- we still feel that the outlook for the second half is still continue to be pressured on the ARPU, given price competition. Fixed broadband, especially, related to your question, the Q-on-Q drop is mainly because if you'll notice in the second quarter, actually, from beginning of the year, there had been very low price plan offered into the market. Some of the competitors had offered as low as THB 299 of the package. So that has a lot of impact onto the ARPU. We try to avoid -- well, the THB 299 hasn't been very much popular on AIS simply because we are focusing on adding value, and we try to sell the THB 399. However, that still continued to pressure down the level of ARPU. Your last question around the CapEx. Given the low growth environment, so basically, we try to optimize the CapEx level a little bit more. So previously, we were guiding THB 35 billion to THB 40 billion. For now, we believe that it will be approximately closer to the lower bound of what we previously guided, which is around THB 35 billion. That would mostly be on the optimization of mobile network, while fixed broadband should remain to continue its own plan.

Maybe just further on some of the answers to the questions earlier about the net adds this quarter. So for the prepaid, we do see less churn, largely because of less travelers in this quarter. And also because there is also some of these new -- better new customers in this quarter, coupled with some of the pre to post migration. So when you look at the postpaid itself, we have increased largely from the pre to post migration. And also after the lockdown, the new subs has actually increased quarter-on-quarter. With regards to the Khun Nattiya mentioned, the ARPU dropped largely from the intense competition. Majority of the price plans now in THB 299 and THB 399, but largely on THB 299. And also because of the steep competition, we have to also try and save the churn by offering them lower plans upon renewal. On the CapEx target itself, yes, we'll be reviewing it. And we think that there are some opportunities for us to delay some of these CapEx this year. We will see wherever it's necessary to help us to improve on some of the areas that we are rolling out, including looking at some of the options, for example, like having 2 sectors instead of 3 sectors. We have done some tests, and it shows that actually, it's very promising. So we'll be expanding that to some of the areas nationwide.

Maybe one follow-up question on the net ads. You have mentioned about the pre to post migration. It picked up quite a lot, it seems. Is that because the shops -- most of the shops have reopened since the middle of May?

I think not because of the shops are picking up, I think also because there is also the effort by us in trying to move customers from pre to post. When you look at the pricing plan for prepaid and postpaid, so prepaid there so this 10 MBPS at THB 250, and we extended it to THB 300. And we look at the postpaid low price plan that we have from THB 300, we increased to THB 349. Now both those plans are actually quite similar. The only thing is that for the prepaid plans, customer needs to -- we offer the prepaid plans only for new and for [indiscernible]. So for existing customers, if you want to move down to that plan, you actually have to terminate and recontract again. So you have a change in number. You are moving from pre to post, one of the benefits is that when you move to almost a similar plan as prepaid, but you retain your mobile number. So I think that's one of the big reasons I think why we see prepaid customers moving to postpaid with a slightly higher plan than the normal prepaid, but having all the benefits of postpaid and the ability to maintain the number. I think for the quarter, although the total net postpaid 386,000, the pre to post is about 60% of it. So we do see a large proportion. And actually, it's good for us as well because this is more stable and is more recurring in terms of the revenue.

Our next question is from Colin, Crédit Suisse.

I just had a question on 5G. I note that you've throttled back the CapEx a little bit, which obviously looks sensible in the current environment. Just on the applications, it's been a year now since China really got going, Korea more than a year, are you seeing anything in Thailand, either on the industrial side or on the kind of mass market consumer side that you think 5G will actually contribute to that you think you could monetize? Has there been any progress there? That's the first question. And then a related point, if not, then what are you thinking in terms of your pricing strategies for 5G? The danger we've seen from some of the other markets is that in the end, the operators have kind of given up on the applications and just gone fully unlimited with maybe higher ARPU, but a lot more data use. What's your thinking in this regard? Is that something that you might need to consider, if the applications don't come through? Those are my 2 questions.

Thank you for the question. So for 5G, for both consumer enterprise, since our event on the aspirations for 5G for the rest of the year, we're working quite vigorously with several partners, including the corporate industrial estates. For consumer, we are currently having several applications on pipeline, including like the home education, the live VR concepts, high-quality games and also Ultra HD content. We have been working with several partners in getting some of these contents, one of which will be extending our AIS PLAY to include AR/VR content. So we have actually lined up of several partners already. And in the next few weeks, we will be announcing some of those partnerships. So those are in place. We have a road map of services that we'll be rolling out for the consumer with regards to AI and VR. For enterprise, we have announced some partnerships with Sahapat, [ Villa Manta City ], Laem Chabang Port as well as Central Pattana. So all those projects being in discussion and some are in development. We are also putting some MEC, multi-access edge computing at Pattaya to service some of the applications that we will be rolling out with some of the industrial estates in the EEC. With regards to the pricing plan, we are still working on it. We will be announcing that probably in the -- in September itself. So top of the mind, we'll also see how we can monetize it and not just, as you mentioned, getting a consumer just to subscribe to a higher speed plan. So network slicing is one of the areas that we are now looking at. We have been calling network slicing. So we'll use that to ensure we can have net slices, especially in the industrial estates where now slicing is especially useful, especially with the low latency and high-speed and ultra-high reliability. The recent launch that we have on the FDW, EDS will also be based on network slicing.

Maybe just to add a bit more from what Khun Hui mentioned. I think, for us, we do believe that there's potential for 5G that we can monetize, but it has to be built up because of it's a new way of application. For example, I think on the corporate side, there are quite several usages that really benefit the corporate will. For example, I think we look at the solution for the port authority. It actually can give them a lot more flexibility and also reduce the investment as well as operating costs. The number that we saw, I think, it could be in almost like THB 50 million to THB 100 million saving for each of the port, depending on the size. So I think that really something that can benefit to the clients. And for consumers, it's unfortunately that this year, we won't be able to see the Tokyo Olympics. Otherwise, I think that will be a good proven ground with the 5G application on -- I think certain entertainment sector would be useful to the consumers, and whether they are willing to pay for extra money -- extra point of view, they can get from the stadium. But nonetheless, I think we do line up quite a lot of content for the consumer to be able to see and have a different experience than what they can see from the 4G era.

Got it. Just one follow-up on what you were talking about on the enterprise side. The industrial states like Amata, et cetera, would those industrial states not already be fiberized, though? So it's what you're talking about additional wireless applications using 5G within those areas? Or is it the case that the 5G is offering a fiber-like experience in some of these estates for the first time, if hopefully, you get what I mean by that question. That was my follow-up.

Yes, you're correct. For places like Amata, most of them, we have fiberized that already. But we are looking at the next area of applications on how 5G can be used for some of those industrial. For example, industrial automation, which Khun Tee mentioned, and also for some of those factories, they're also going to experiment with fiber FWA, EDS using the 5G as a sub -- as a complement or supplement to the fiber. So those are the applications that are in discussions now.

Yes. I think just to add, initially, when I look at the application at the port, all the point right now also fiberized. But having 5G connection can actually free up or give them a lot more freedom in how to operate an equipment. I think that the same will apply to some of the factories in the estate. Although they already fiberized to a certain extent by having a freedom of not having to attach to a wiring can sort give them more flexibility to either design operate or change the production line. And I think that we do believe that there is certain or some benefit in that. As I mentioned, number I saw from the estimation of the increased productivity in the port or reduce that investment, it's in the THB 10 million to THB 100 million over the next 5 years. So it could be substantial for the big factory or the big corporate to look at the new application that 5G can offer as well.

Our next question is from Khun Thapana, TISCO

I have 4 questions. Just number one, I believe you launched the GOMO brand in Q2. What's the rationale behind this decision? And could you give us some indication of how many subs you had for GOMO? And how much that contributed to your postpaid net add this quarter? Number two, you mentioned the pre to post being the main driver. And I think you said 60% of the net add came from this conversion. Just wondering how much more scope for this activity can we expect going forward? And should we be looking at 300,000-plus postpaid net add per quarter being the new normal, especially in second half '20 due to your new conversion strategy? Third question. I believe that your -- you said that the 5G CapEx optimization is partly driven by the -- the change in view on demand. Now one of your competitors had a presentation during the 1Q analyst meeting, predicting that we'll see 50% 5G penetration by 2024. Do you agree with that now? Or is your assumption very different from this? And the last question is on the issue of your mobile CapEx reduction. I just wanted to verify, is the reduction from scaling back the 2,600 cell site coverage? Or is it mostly from reducing the CapEx to cell site by, say, for example, scaling back the antenna types that you're using?

Let me take the first question first. Yes, the GOMO is our foray into making the fully digitized product, which we think suits the current millennial who are more adept at online activities. So the GOMO is actually from start to end fully digitized. So currently, the base that we have since our launch about 20,000 subs already. We are still fine-tuning the product because one of the requirements for the GOMO product is that customer has to pay by credit card. So it's more or less also convenience for customers, also convenience for us. So that we do not have to actually look at whether the wallet has enough money. GOMO is psuedo postpaid product. We charge ahead of the usage. So looking at the way that the customers are subscribing, and so we are finding the process so that we'll make it more seamless. We'll also be reviewing whether paying by credit card or the big card is the only way for payment. So that's under consideration. Your second question on the post -- pre to post, currently, it's about 60%. I think, yes, all the while that we've been trying to move the high-value prepaid customers or other the long-term customers over to post for giving us more consistency. I think moving forward, we'll continue to promote pre to post. Largely, the pre to post also depends on the postpaid pricing versus the prepaid pricing. And so customers will have a choice whether they will to continue staying on prepaid or to move to postpaid. I mentioned earlier, one of the key drivers for that is the ability to retain the mobile number when you move from pre to post. I hope that answers the question. For the 5G CapEx optimization, yes, we'll be looking at it because currently, when we look at the movement of customers -- during COVID time, we see customers moving a lot out into UPC, and they have been putting CapEx over there to service the -- for them. Post-COVID, I think there should be some shifting back into cities, and we'll be reoptimizing some of this CapEx to ensure that we offer the coverage in those areas, but not having to overly put in additional CapEx. So that's in the process of reoptimization, and I think we'll have a third feel of it in the next 2 months.

I think the -- I think last one you asked more specifically about whether we're reducing the number of cell sites for 2,600. I think, as of now, we try to maintain the coverage that we intentionally try to cover in the first phase of our 5G coverage. However, I think we do look at the way to optimize the investment in each of the site. And also, I think the CapEx that we lower -- we also look at some of the 4G investment that we were going to make, and we try to adapt and optimize that more towards the new normal that's going to happen after COVID. So I think with those combination, then we feel that we can reduce investment amount so that it will be more aligned with the growth prospect of the business.

Okay. So I just have one quick follow-up about the pre to post conversion. So would you say that the -- because of the trend has been happening and what you mentioned, should we expect 300,000 to 400,000 postpaid net add to be kind of the new normal going forward with half of it coming from the conversion?

I think -- sorry, I'll take this one. It's tough to say whether it's a new normal. I think there are a few factors that drove the higher net adds, I think partly because I would say, one thing is, we continue the pre to post initiative. But secondly, I think because of the bad economy, then there were quite a few customers that are looking for better plans. And I think that drove the acquisition up as well. So I think going forward, it really depends on the situation. And also, it's more of a dynamic of competition among the 3 operators. So it's difficult to say whether that will be a new normal acquisition level that you're going to see going forward.

Yes. Just to further add on that. Not just the competition, but the other thing to look at is also the pricing between prepaid and postpaid. As I mentioned earlier on, we came to a point whereby the prepaid promotion and the postpaid -- the prepaid is only slightly lower than the postpaid for the same 10 MBPS. So moving forward, the price difference is bigger than the situation may change. But the first 2 quarters, it's also because the reason is because the prepaid and postpaid pricing gap is not very huge. Was there a question on the penetration? What was the question for 5G penetration?

I think the view of the 5G penetration by 2024. So I think one of the competitor mentioning that they expect 50% penetration by 2024, and what's our view on the 5G penetration?

Yes. I think previously, we -- during the event, we also have mentioned that we expect penetration by 2024, 2025 to be about 70% to 75%. That's our plan. So obviously, things may change. And also, it depends a lot on the availability of the 5G handsets. So we think that by -- currently, by August, there will already be 1 to 3 5G handsets in the THB 20,000 range, and by next year, there will be more. When you look at 5G versus 4G, the price drop for 5G actually is steeper than initial stages of 4G. So we are quite optimistic that the price of 5G handsets will drop faster than 4G. So the price drops okay, then affordable to the public. I think you will help to push migration from 4G to 5G. I expect you are probably also trying to move 3 to 4 and also 3 to 5. So there are some -- we see some positive signs that this will happen over the next few years, and we are still putting a target of maybe 70% to 75% population coverage by 2024, 2025.

Our next question from Khun Weerapat, CLSA.

I have one question regarding SG&A expense. Based on the second quarter numbers, do you foresee that you can lower SG&A expense further in the second half of this year? And if so, which cost item that you can cut further?

That's, I would say, difficult to predict, but I'll say we'll try. I think there are a few levers that we're going to try to squeeze more efficiency of the spending, one of which is marketing money. I think in the first half, we already did try to optimize the spending already quite a lot. But hopefully, I think we can find better ways to market to our consumers. Second half, I would say, there could be additional in terms of the people cost as well. I think in the plan, we do have a plan to increase in certain areas, new resources and things like that. So we'll look at the necessity and how to best utilize the people we have. And also we may look at the channel cost because post-COVID, even though the consumers still walk back to the job. However, the trend is there that we need to manage the job in such a way that if there's another COVID, then we can rely on the online and in other channels to serve the consumer. So I think those are a few things. And longer term, I think, on SG&A, we also look at the new way of work because that can also give us long-term savings as well as the way we interact with our consumers. A lot of the transaction that's happening, we also try to calculate the cost saving totally because now we have e-bill a lot of e-services that we provide to customers as well as we expand that to cover the corporate customer as well. So with all those, then hopefully, it's not only helping us, but is helping the world and helping over plans to save on our spending and so on.

I have follow-up question regarding the shop. In the medium to long term, do you foresee that you can downsize the shop space or close some shop to save more cost?

Yes. We are constantly reviewing the allocations of space. So currently, you actually pointed out rightly, in fact, currently, we are in the process of reviewing the overall shop locations to see whether that in different areas of density, whether we have the shops there and an existing one, whether it should remain or we should be closing. So that's not only for the AIS shop, but also for our franchisees [indiscernible]. So that's an ongoing exercise because in view of the COVID situation, movements of customers have changed. And also as Khun Tee mentioned, we are trying to -- we're also improving our internal process by having more of the online. So the SG&A overall will be improved. The other point I would like to mention is also that because of this COVID, we are also moving a proportion of our call center now working from home. Before that, 100% are now working in the office. So currently, we have about 30% to 40% of our call centers working from home. So this is not just about saving costs, but also improving the efficiency of our staff. So they don't have to actually travel from home to office every day, so they can start work in the morning. And because of that, we are also able to better optimize the allocation of staff based on the traffic patterns throughout the day. And so now staff can even work as early as 6:00 a.m. Previously, when you reach office, about 8 a.m. or 08:30, so and also to the evening as well. So by moving the staff to work from home, not only improve efficiency, but also improve the work/life balance of our staff. So we'll be looking at that and really improving on that and maybe expanding that as well.

The next question from Khun Pisut, Kasikorn Securities.

I just joined the call, sorry if my questions were asked. I have 4 questions. The first one is on your dividend. Why you decide to pay the dividend from the profit post TFRS 16? Is that of profit pre TFRS 16, which is quite different. The second question is on the 5G consumer devices. Is it possible for F1 and 2 to control 5G devices available in the market? That will not be compatible with 5G, 2.3 gigahertz. And number three, on the prepared competition, as you mentioned that the competition is getting better. What sort of your financial numbers can we expect to see in coming quarter on this front? And the last one on the fixed broadband. Will the THB 399 price point become the normalized level for the market? Or do you plan to reprice it when your target, by the way, this is met.

[indiscernible] I think dividend because our latest accounting practices will be based on TFRS 16. So we should base our payment on those numbers, and that will be the practice going forward. So -- and the number differences could be very small. So I think that should suffice the promise that we have with the investors.

Regarding the 5G devices, I think that's a global market. I think Thailand market is not big enough to dictate anything. Anyway, there's a free market out there. The manufacturers are at liberty to do whatever they want. Having said that, I think -- sorry, not having today. I think this one is a free market, so we are not able to control and also not advisable because we also depending on the manufacturing capability or the scale of the international market to ensure that the price of handsets will be affordable. And most of the manufacturers today to be successful in most countries, in fact, they put in all the possible spectrums that are available for 5G. So they do not have actually customized handsets for different markets. That helps actually to reduce the cost itself. Let me take the fourth question, I can't remember the third one. THB 399, whether that will be the norm for the market and whether we will be increasing it once we hit our target. Well, the pricing in the market is not determined by us. It's more from the competition because we have to compete effectively against the market. So if the market price is around that, unfortunately, we have to match in order for us not to lag behind. And as you know, scale is also important. So the THB 399 pack now is based on the market trend itself. In fact, at the beginning of the year, we did actually try to lift up the price in the industry, by lifting the price, but we found that the industry did not follow. So we are forced to compete again the middle of January. So now it's about THB 399. Although the markets is at THB 299, but we are selling at THB 399 from upside by getting customers to pay THB 100 for the playbox itself. So those are additional value that we are putting on top, but differentiating with the content on top of the basic connectivity. Today, about almost 30% of our customers are taking up the playbox on top of their normal plan. I'm not referring to generally because we also have the THB 599 plan without playbox or with playbox. So we are seeing an increasing trend in customer taking up the playbook. So generally the THB 399 price plan for us is at a level where we are comfortable and we think we can compete in the market. Sorry, what was the third question?

[indiscernible] I think the third question was maybe if the prepaid margin getting better, then what would our financial look like? That -- is that right, Khun Pisut?

I guess that's the question.

Okay. It's difficult to say what it would look like because it really depends on the competition level. But what we can say is, a significant part of the drop in the prepaid revenue that we had also contributed by the price competition in the market. I think for sure because we're moving -- keep moving, continue moving pre to post conversion. So a lot of -- not a lot, a part of our prepaid revenue has been moved up to postpaid level. So that part also consider quite some major chunk in the decline. But the other major chunk is also because of the way the prepaid has been priced in the market and the way that people change their usage behavior. That's why we also see a drop in the prepaid. So mainly it's from those two, plus the third one, which is the one-time SIM that early this year, there is a lot less traveler than last year. So all those 3 factors contribute to adopt in the prepaid. It's hard to predict or give you a sense of how much the improvement can be, if we can lower price competition. But I think to us, it would be a good improvement, but to what extent then it's difficult to give you a number.

Just to add also, when you look at the pricing in the market. In the first quarter for those prepaid unlimited plans, the plan is for 12 months, right? So that buys us to a 12-month period where we can't change any of the tariff. For the same quarter, you noticed that the period is reduced from 12 months to 6 months, so giving us a shorter period. So that in case the industry changed or the market changes, we will be able to actually effect some of those changes when there are some expires. So there is something that we and the industries are doing. And now the price plan having a shorter term of 6 months. Hopefully, that the market picks up. We can actually also do some of the changes for those having the shop expiry.

The next question will be from Hussaini Saifee, Citigroup.

Three questions from me. First is on the THB 299 fixed broadband plan. Just want to understand that is -- are the telcos able to make money? Or are these plans profitable at THB 299 levels, providing fiber connectivity? That's question number one. The next question is, what kind of opportunities are you seeing in the enterprise space in the wake of COVID-19? Are there takeup level of collaboration and in compute infrastructure, helping AIS in any ways? And finally, to your earlier remarks related to 2 sector infrastructure or site build out versus the sector. Just want to understand what is driving that? Is it because of the cost component? Or is it that from 3 to 2 sector, it doesn't really impact the efficiency levels.

On the cost first question, it'll be difficult to answer for other operators, whether the THB 299 is profitable or not. But I think as in most services, when I think operators look at it from a totality perspective, so some pricing plan may not be profitable whereas others. So from our point of view, we're also looking at -- from a total point of view, even like for mobile, some of the price plan may not be profitable. But look at the total itself. So for doing business, we can do it on product-by-product basis. So it's in totality. For the enterprise, the opportunity during the COVID, we do see increase in enterprise subscribing to link Cloud, data center, ICT, especially when most of the start by working from home. So there is an increase in Cloud 365 as well. So including using of Zoom. So we do see increase in those. For the optimization of the network, it's not about cost itself, but also -- because when you have a very dense network already. So the opportunities for optimizing the radio spectrum or the radio publication is a lot -- more -- a lot more possible. So we are experimenting with that. So that's -- actually, we have done a few of those and that gives us almost the same results. So that will actually help us in some of the cost savings. That also includes in building. So we're also experimenting different positioning of the antenna to achieve the same coverage by the different positioning of some of these. So there is a lot of this innovation that we are doing. We have view to looking at whether we can improve the efficiency instead of relying on the legacy methods of installation or in the implementation of some of this equipment.

The next question will be from Khun Maria, Maybank Kim Eng.

Actually, my questions have been answered quite indirectly, but I just want to a bit of specifics. Two questions on how we can in the decline of the prepaid sub day, how much of that is solutions same? And how much it might brand label? And in the case of SCB, your ARPU will be down to 1% year-on-year, are you still breaking even at the EBITDA level? The last one is a follow-up on CapEx. You mentioned that the scale back CapEx also includes optimization in 4G. Anticipating new normal, can you clarify what that entails, please?

I think maybe the first one, the decline in prepaid. As I mentioned to you that there are 3 factors contributing due to that. One of those is the onetime SIM that we look at, and mainly it's coming from tourists. What we saw in the data, the [indiscernible] SIM still maintain the level compared to pre-COVID, but the True Sim, it did drop a lot. As you all know, that our sky has been closed for the last several months. So True SIM almost totally gone. For the FBB ARPU decline as we talk a lot, it's mainly driven by the competition in the industry trend. And because of that, we're also looking at the way to operate in this environment. So we try to lower our costs, both in terms of operating costs as well as the acquisition costs. We reduced the cost per acquisition by, I think, two things: One, the -- building of the last mile. So the cost of last mile, actually 3 things, the course of last mile, the acquisition channel as well as the M&A contract. So I think we use all those 3 areas, try to squeeze out the cost so that we can make sufficient profit given the new pricing dynamics. I think we still believe that we can be profitable at EBITDA level. However, it depends on the -- like we said, we should look at the average ARPU of the whole point. And hopefully, I don't think it's going to go much lower because why I think there is a sharp drop in ARPU this year, it's driven by 2 things: One, for sure, competition, but it's because of the economy as well. So the economy and COVID impact, it actually drove some of the operators try to be too aggressive in order to capture kind of optimistic acquisition that's happening during the last 2, 3 months. But we'll see, going forward, when hopefully the economy will pick up next year, then we can really try to manage the pricing to be at a reasonable level. In terms of -- I think the last one is on CapEx. We mentioned 4G because when we did the planning last year, we also looked at the traffic growth in the area, and where we do expect increase in capacity that would be required. Over the last few months, then we need to redo the planning because the pattern of usage has been shifted quite significantly. And also, I think going forward, then we also try to replan and see where the thresholds really are, then we'll keep invest investment in the area where it is really needed. So I think that is a combination of many things. And I don't have enough detail to be able to tell you how we come up with the new number. But for sure, there are other ways that we can try to manage the traffic inside the network. As you already aware, recently, there are a lot more kind of unlimited low price plan in the market. So a lot of data usage that has been going up because of that. So we also need to see with sell site that really have a high value versus the low-value traffic, and how we should manage all those. And a lot of time, all the lower end traffic will have a cap on speed anyway. So I think for us, we need to do more detail to make sure that every investment in this year is worthwhile.

So when you say change in the pattern of usage, would you referring to those that are in a low-value and a high-value data? Or is there really another kind of change in the past that needs -- that can allow you to maybe remove some of your site and boost other site on the whole [indiscernible].

Actually, it's many, many factors. For sure, as mentioned, the type of usage, the type of packs that's happening in the market. The second is also the mobilization of people. During the shutdown, and we see a lot more people using data in the country versus after opening up, and we see some people moving back inside the city. And in the past, I think we designed the network so that we have a lot more capacity inside the city itself. So and also because we have new spectrum as well. So with all those, then there are many ways to actually try to manage the network. For example, in the past, you used to have 2,900 as a low band. Previously, we're going to have 700, and 700 can give us a much wider coverage. So with all those, then instead having to increase or split site, we can maybe just change to be dual-band radio to cover wider areas. And in some cases, like you mentioned, we can also try to reduce some sites, consolidate sites, and that it's all in play now. With 5G that we roll out on 2,600, as we mentioned since the first quarter that will use a portion of that capacity to utilize as a 4G capacity, and so far, we have actually achieved the usage of 4G and 5G in the new 26 network that we laid out. So hopefully, with all those, then the optimization is quite real, and we can actually benefit from that.

So -- okay. Then with all these fine-tuning and tweaking of network, will this translate into something in relation to asset values? And we are basically on asset values or writing down the value of the network. Will this be consequence of this fine-tuning activity?

No. I don't think it had anything to do with the asset value that we have because even though we consolidate sites, we can use the equipment in other location, nearby or in the same region. So we won't be able to -- or we won't be needing to have any write-down or impairment based on the optimization that we are doing.

And as we're running out of the time, we will take the last question from dial-in call. [Operator Instructions] If no questions from dial-in call. Thank you for joining us, our conference today.

Thank you.

Thank you.

Thank you very much.