True Corporation Public Company Limited (TRUE) Earnings Call Transcript & Summary

Good afternoon, and welcome to True Analyst Conference for the First Quarter of 2020 Results. Together with me today, are Khun Vichaow Rakphongphairoj, Executive Vice Chairman of Executive Committee; and [ Khun Anat Mekpaiboonvatana ]; and myself, Yupa Leewongcharoen, Group CFO. So we will start with the presentation.

Thank you, Yupa. And good afternoon, and welcome to True's Analyst Conference for the First Quarter Results of 2020. Let's start with the group's highlights. True Group reported continued growth with core service revenue increasing 5% year-on-year, and we are confident to maintain mid-single-digit revenue growth. Also, we are working very hard on cost and productivity improvements to increase profit, especially during such crisis, which I will talk about towards the end of this presentation. TrueMove H, once again, outgrew the industry with service revenue growth of 5.2% year-on-year, driven by double-digit growth of postpaid revenues, adding 200,000 postpaid net adds in Q1. TrueOnline's core broadband revenue increased, and we have seen growing demand for broadband installation following the city lockdown in late March. TrueVisions was affected by COVID-19 with no events-based revenues as well as their associated costs. True Digital Group continues to strengthen True Group with its comprehensive digital platform and services adding revenues from content as well as the IoT and digital solutions. At the same time, additional 5G spectrum is deployed for both 5G and 4G capacity, expecting to push higher growth for both mobile and digital units. Last but not least, True Group offers an access to True Virtual World, a cloud-based and video conferencing platform to support work from home, e-learning, entertainments, and knowledge sharing. Next page, please. Now moving on to the financial performance. Consolidated service revenue increased year-on-year with growth in both mobile and broadband Internet. Q-on-Q was pressured by COVID-19 impact on TrueVisions with an absence of events, which lower both associated revenues and costs. Excluding these events-based and noncore revenues, service revenue grew 5% year-on-year and 1% quarter-on-quarter to THB 25.8 billion. Core operating expenses were well controlled, flat year-on-year, declined Q-on-Q on lower selling and marketing expenses as well as savings from the city lockdown with lower rental and entertainment costs. This drove EBITDA up 12% year-on-year and 5% Q-on-Q to THB 8.5 billion pre-TFRS 16 and THB 12.2 billion post-TFRS 16. Our bottom line was negatively affected by the TFRS 16 adoption of around THB 200 million, resulting in a loss in the first quarter. Along with the new accounting adoption, value of the leased assets in use will mature and impairment loss was adjusted to brought forward deficits, complying with the financial reporting standard for the first time adoption. Next page, please. For the cellular segment. TrueMove H continued to take the lead with service revenue growth of 5.2% year-on-year to THB 20.1 billion despite the COVID-19 impact on international roaming and tourism. Q-on-Q also saw growth, while the other major industry players showed declining trend. Key growth driver was from solid performance in the postpaid segment, with revenue increasing in a double-digit rate from the previous year, industry's highest postpaid ads of 300,000 in Q1. We also benefit from synergy with our strategic partners, whose nationwide outlets are not affected by the city lockdown. The prepaid market, however, was pressured by competition and COVID-19 impact, as mentioned, thus, recording negative net adds during the quarter. Next page. Despite an unprecedented COVID-19 situation, TrueMove H continued to maintain its superior network quality. The latest Q1 test results for nPerf, which reflects overall quality of the connection felt by users, named TrueMove H as the best mobile Internet provider for the fourth consecutive year. TrueMove H is ranked first, both in terms of browsing and streaming performance. We are confident that our network strength, strong brand perception as well as segmented propositions and privileges that match customers' needs will continue to be key growth drivers this year. Next page, please. We see significant upside from 5G and vertical business in the future, while 4G remains the main connectivity in the next few years. Right now, 62% of the devices on TrueMove H network supports 4G 26-megahertz or 700-megahertz spectrums. For consumer segment, 5G is expected to increase ARPU up to 20% compared to 4G based on various surveys. The value of 5G will come mainly from vertical business, which is forecasted to grow by more than 50% annually from now to 2030, according to Analysys Mason. In terms of 5G network rollout, we already deployed massive MIMO on 2,600 megahertz with 3x higher capacity, and will roll out dynamic 4G/5G spectrum sharing in the next phase. Our 5G rollout will be selected in city and high-traffic areas, while also adding on 4G capacity. Currently, our 5G services on 2,600 megahertz is available in city areas of all 77 provinces, and we expect to see significant contribution with 5G adoption rate in Thailand reaching more than 50% by the year 2024. Next page, please. For the broadband Internet segment, TrueOnline's broadband revenue, excluding nonrecurring contracted business, grew 5.4% year-on-year and 1.6% Q-on-Q to THB 6.5 billion as the 1 gigabit per second and TrueID bundle received positive market responses. TrueOnline added around 55,000 net adds in the first quarter, and expanded its total subscriber base to 3.9 million. Following the city lockdown in late Q1, we have seen growing installation demand from customers to date, expecting to push growth in the second quarter onwards. This also increases an opportunity to upsell and cross-sell other products within True Group. Next page, please. True Digital Group remains our key differentiator to stay ahead of the competition. In the first quarter, TrueID was the most downloaded application in the entertainment category. And reached its highest video-on-demand at 36.9 million views, a year-on-year growth of 400%. Content subscription on TrueID continued to increase to 285,000 content transactions, while the [ added live ] chat, voice calling and direct chat functions saw growth with 280,000 active users per month. The OTT platform of TrueID TV also received higher scale with 843,000 boxes shipped. Meanwhile, the privilege and loyalty platform TrueYou, recently launched new 5 caller cards, helping us to reach more customer segments, of which 86% is new TrueCard users. Our privilege campaigns not only enhance customer retention and quality subscriber growth, but also create revenue upside via upsell and cross-sell. True Digital Solutions continue to expand its client base and partnerships on various smart solutions. It focuses on strategic industry verticals, such as agriculture, retail, manufacturing, supply chain, logistics and health care. The unit has connected over 242,000 IoT endpoints and devices, increasing 40% from Q1 of last year. Let me touch a little bit about impact from COVID-19. Although telecommunication industry is affected by lower tourist arrivals, and temporary shop closure, the current crisis comes with growth opportunity as new normal become more prevalent. Consumers and business rapidly move towards digital and online transactions following the city lockdown and work from home. We have seen behavior shift toward remote working, e-learning, home entertainment, online shopping and e-commerce as well as higher need for cloud and digital solutions. Our True Virtual World platform ideally supports such behavior and ensures business continuity without traveling costs. At the same time, there is much more room for optimizing cost and productivity, which we have been heavily focusing on. This include rental rates for shop; office building and network-related as well as content selection and renegotiation; efficient spending on media and subsidy with high-quality subscriber growth; enhancing sales channel, especially digital and online channels; telesales in call center; improving manpower productivity across the board as well as energy and utility savings. This concludes today's presentation. Now let's go to the Q&A. Thank you.

So let's start with the 5G-related questions first. The first question is how much will you spend on 5G CapEx this year and next year?

I guess, I'd like to give you a ballpark figure. We have engaged consulting firms helping us making decisions with aspect as well. So we earmark -- we more or less estimated about THB 40 billion to THB 60 billion 5G CapEx investments in the next 3 to 5 years. It really depends on the take away of how the market responds and that sort of things. So it's not a 1-year type of investment. So it's more or less on a 3- to 5-year horizon.

And next question is what will be your 5G population coverage in 2020 and 2021?

The frequency that we participate in the auction for 5G actually do not have a very stringent requirement for population coverage. It simply has a rough 50% population coverage in the few key cities, which come in earmark for Smart City. For example, Bangkok Metropolitan Area, Chiang Mai, Phuket, those cities. That's about 50% published coverage in the next few years, not within one year. And also in EEC, or the Eastern Economic Corridor, the requirement is to have a 50% area coverage, but only for the industrial estates. And I also do not have a very stringent time line for coverage. And our approach is that at this very moment, as you can -- as you know that a 5G handset -- pure 5G handsets in Thailand is only in the tune of tens of thousands, very small. So we actually roll out the 5G network to offload 4G capacities. And by so doing that, from this point on, will be no 3G, 4G, any other investment. So we totally stopped those other investments. And if we're going to invest, we're going to invest in 5G. But 5G to offload 4G in the beginning. And whatever the public coverage, depends on demand, turn out to be, so be it.

And next question is what will be the 5G adoption rate for next year and -- this year and next year?

We -- at this moment, it's very difficult for us to forecast. But from people that have done extensive studies and the consulting firms, they forecast that it's possible to have up to 50% 5G adoption rate by the year 2024 or 2025. So in terms of -- and if you ask me about 2020, the number, we're actually very low, actually very low.

Next address the question about the 5G technologies. Will you deploy only 5G in SA? What will be your decision point either to deploy 5G SA or NSA? And what's the difference in terms of investment?

Before I answer that question, let me share with you first is that since 2 years ago -- if you look at a network, there's actually 3 basic components. The IF of the radio, which is the stations, the towers and that sort of a thing. And then there's a transmission, and there's also the core network. We actually have upgraded our core network since 2 years ago to be 5G ready. Not because we try to pre-rest, because we feel that rather invest in 4G, we might also invest in 5G-ready equipment with the same cost. So we don't have to invest for 4G. In the same token, we also have upgraded our transmission network to be 5G ready and not because we like to invest ahead of time. And since the transmission capacity to increase -- to support 4G anyway. So we also have invested in the transmission portion to be 5G ready. So in fact, we have already get those done. And at this moment, we definitely depends on demand in the market rolling out the network in the higher side of the radio frequency part. And obviously, in the first stage, you'll be non-stand-alone or what we call the NSA. At what point that we consider for SA? SA, basically, that you can use network slicing and all those things. But all those things has to be dependent on the need of the market. And those will be uniquely supporting 5G network requirements in the area of vertical solutions. For example, if you have a very fancy vertical solution about remote surgery, you have like a driverless cars or all those fancy ones, you definitely need NSA. But at this very moment, those vertical solutions are more or less still on a trial and on early stages. So our network is partially ready now. And when the vertical solutions start to come to fruition, it's definitely not in the year 2020, and might not even mature in the year 2021. So when those vertical solutions start to mature and come to fruition, we'll consider to turn the network into a stand-alone network.

So back to the previous slide first. There's another 2 question relating to 5G. What will be your pricing strategy for 5G versus 4G? And what will drive mass customers to pay more for 5G? May I ask Khun Anat to help address this question?

[Foreign Language]

[Interpreted] Based on -- obviously, we're new in this area. And because 5G handset is very, very rare or a very small portion today. We -- in the initial phase, we're pricing 5G substantially higher than 4G. However, because it is a trial phase and then the customer is only in the thousands in a country that you have mobile penetration about 140%. That means you have way over 60 million subscribers, which is much more than the population. Only a few thousand 5G subscribers, it's very, very small. So even we price it with a substantial premium, but we sought to give an initial discount to get the full early adopter to use it. But the intention is to price the 5G higher in terms of double digit, maybe 20%. Obviously, it has been supported by new services like in the consumer part, like VR, the virtual reality or like AR, the augmented -- particularly in the augmented reality arena. And those has been proven to be the case. For example, the one that is quite advanced area in the Korean market.

Next question, please. NBTC plan to auction 3.5-gigahertz spectrum end of this year. Is it possible in your view? And if happen, will you be interested to buy more? What will benefit you from adding 3.5-gigahertz band?

I'd like to answer the second part of the question first. Will True be interested to buy more in terms of 3.5-gigahertz band? I can answer with definite no. With 900 meg -- with 90 meg of frequency on the 2.6-gigahertz band, and then with 800 meg on the 26-gig band and also with the low band that we have, 700, and 850 and 900, there's definitely no need for us to buy anymore. And that is a definite no. The first part of question is that NBTC plans to auction to 5G. And I suppose that question has to be posed to NBTC rather than posed to us. But we believe that it's probably unlikely that it will be an auction at the end of this year. And if you know that in the -- there is an active -- I should not say that, but total -- anyway, I'll stop here.

Okay. Let move to the next question. So the 850-megahertz spectrum has an interference with the 900-megahertz spectrum, requiring additional investment on filter. Who will be responsible for that? And how much for the nationwide installation cost?

As you know that the True [ would like to tap ] 850-megawatt spectrum, the spectrum actually belong to CAT, it belongs to CAT. So this is CAT's decision on what to do. And we, as True and as CAT's partner, as CAT's close partner, will support them wherever we can. And since the 850 is the existing spectrum and the dtac 900 coming up later. So obviously, somebody have to bear the cost. And CAT, I believe that is not going to bear the cost. And I believe that NBTC has indicated that they're going to support dtac to support them in the tune of THB 2 billion or THB 3 billion for that. So whenever CAT asking us to help to come out with the filtering installation, that sort of thing, we will support CAT fully. But obviously, it's under one condition, under the single condition that it should not damage our network. And the additional cost has to be paid to us.

Now let's move to the commercial part. First question is on competition. The competition remain intense with fixed speed unlimited price plan for both postpaid and prepaid, while the added voice call will reintroduce. Will this trend continue and pressure outlook? We ask Khun Anat to help address this question.

Yes. May I speak in Thai, and then ask Khun Vichaow to translate for you guys. [Foreign Language]

[Interpreted] What Khun Anat has said is that there is a clear trend in the industry, and we start going to -- we are starting to tone down the intensity of the competition. Even though the fixed speed -- even though the unlimited fixed speed is still in place, but then the first step is to cap the total volume. For example, now we start to cap at 30 gig and then with a trend going forward. So in this part, the industry realized the impact. And then I think the operators start to tone down. The trend is quite clear at this moment. In terms of fixed call -- in terms of voice calls, it's also -- the trend is also clear rather than all net, I mean, across all networks, operators have started to tone down as well and start to focus on perhaps unlimited, but starting with only within the operator's own network. So there will be reduced, the interconnection costs.

Next question is on broadband. Please update competitive intensity in broadband segment and your strategy. Why did your net adds slow down in the first quarter this year and your ARPU keep falling?

[Foreign Language]

[Interpreted] I think the observation is quite correct. There is a rather high competition in the broadband market, particularly in the low-tier areas. In terms of the THB 299 per month and the THB 399 per month, in rather low ARPU type of offerings in that marketplace, particularly during this requirement for work at -- work from home and also the COVID situation. And with competition move in this area, we have to manage. So yes, the intensity is still there.

[Foreign Language]

[Interpreted] Khun Anat explained to you rather long, hopefully, I try now to cover the whole thing. But since we all are together, so we more or less say the same thing, in the same manner. Aside from the low-tier that we mentioned earlier, however, we intend to uplift the ARPUs by using the approach that we have been doing over the years, particularly in convergence, for example. For the broadband subscribers, which subscribe to less than 1-gig solutions, our intention is to upsell and cross-sell. And on the TrueVisions side, we upsell by providing customers the opportunity to have more channels and we also up the packages. And we also provide OTT boxes to our customers. And this -- with a lot of these offerings and activities, we were more or less able to preserve the mid-tier and the high-tier subscribers, still maintain those subscribers. And we also differentiate by deploying IoT or Internet of Things. For example, we have exclusive cooperation with Google and with the home device, which can be voice activated, and we also provide IoT access points for the household, which can cover the whole house by paying perhaps only THB 100 more. Then you have the Wi-Fi coverage to cover the whole household. And we also, particularly during this COVID-19 situation, we also pushed for the cloud solutions. And we quickly provided a Virtual World solutions for people to work at home and for home instructions and learning from home, and also in the health care part. And besides that, we also are able to leverage and synergy with TrueID and TrueID's content. As we mentioned in the presentation that the take-up rate is tremendous. And with all these is things that we talk about, for example, up-speed, more channels, OTT box, pack data higher, supporting work from home and with synergy with Google and then with cloud solutions and so on and so forth. Actually, less than 10% of the new subscribers actually subscribe to the low-tier packages. 90% of the new subscribers still subscribe to the mid- and high-tier packages.

So we have already shared our strategy for ARPU uplift. So let's move on to next question. True Group benefit from the partnership with CP Group during the city lockdown. Can you please share your number of outlet, strategy and plan?

[Foreign Language]

[Interpreted] And obviously, we are very keen on our synergies with CP Group and then with our sister companies, particularly Makro and 7-Eleven. During the COVID-19 city lockdown, and as you know that the shops -- our shops and our competitor shops have been closed. We're still able to maintain sales momentum because we have our sister company's shops that are still available to us. And on the shop-in-shop alone that we have our own shops within 7-Eleven in the tune of 800 stores. We actually have our own shop-in-shop in 7-Eleven branches, 800 of them. In Makro, in 50 stores of them that we have our shop-in-shop presence.

Next question is on the -- COVID related as well. Given uncertainty upon the COVID-19 situation, what are your key priorities between market share, revenue growth, profit or cash flow? I would like to address this question myself. I think we have enough market share, and we are now focusing on margin and bottom line. That is our priority. And especially during the COVID situation, our margin, profitability and cash flow would be the priority. Next question, please. To move hedge-posted ads, were they from pre to post or [ M&T ]? What is your strategy to sustain this in the following quarter?

[Foreign Language]

[Interpreted] In terms of TrueMove, the question about the postpaid performance. Obviously, the majority and the main contributing factor is our synergy with our sister companies, particularly 7-Eleven and Makro. During the city lockdown, we still have outlets. Unlike the other operators, we still have outlets, in the tune of -- as I mentioned earlier, 800 stores in CPO and then 50 stores in Makro. And in 7-Eleven, the entire 12,000 stores are still able to sell our SIMs and that sort of thing. So we do gain a new customer base. And in addition, the design of our price plan -- we try to design price plan is appropriate during this particular situation. And on the ongoing forward basis, we would still like to keep the strong partnership with our sister companies going forward.

Next question is on postpaid ARPU. What are the reasons for postpaid ARPU growth despite loss of roaming revenue and COVID impact?

[Foreign Language]

[Interpreted] The reason actually is continue from my previous answer, is that we do able to access, during this time, new customer basis. And with our Makro store and 7-Eleven store presence, we're able to get into areas that we were unable to get into prior. And in addition, we try to propose effective price plans and also with a slightly higher ARPU range. And using analytics, we were able to provide packages to target those new subscribers. And also, in terms of with the analytics and during the lockdown, people tend to used up their [ the rather ] rapidly. And when they are used up, we try to offer them with our analytics to target them -- to offer them to help problems and that sort of thing. So I believe those will contribute to some of the ARPU uplift, particularly on the postpaid side.

And then on the prepaid ARPU, what are the reasons for prepaid ARPU holding up nicely despite tourism and lockdown impact?

[Foreign Language]

[Interpreted] In terms of prepaid, it's very clear that the impact is rather severe, particularly in terms of tourisms because the tourist market basically is gone. However, we still have a competitive mobile channel. And with our presence, direct sales and our presence with Makro and the 7-Eleven outlets, we're able to address the low market areas -- the low ARPU areas. And using analytics, we are able to pinpoint those areas to the district and sub-district levels. And I suppose those helps to maintain the ARPU and uplift it slightly.

Next is on the NBTC measures. Please update the impact from the NBTC's measure on 10 -- on the 100 minute free call, 10-gigabit mobile data. How about consumer traction on the [ FIFO ] broadband installation and the pay-TV disconnection during April and May?

[Foreign Language]

[Interpreted] In terms of the NBTC initiatives for the 100-minute free call, the program just completed, as you know, and we will take this opportunity to investigate what kind of impact. The impact still is not really clear at this very moment. As for the 10-gig and also the 100-meg offerings that is being put in the marketplace, the people are going for those solutions, basically, the one that has relatively low usage. It's actually providing us a tremendous opportunity to educate the market, and also able to -- we also are able to -- we would like to take the opportunity also to offer those users, the potential to perhaps using 1 gig and -- for a free trial period. And then when they start to appreciate data speeds, and then there'll be a potential opportunity for us to upsell.

Next is on the financial part. You succeeded to refinance THB 12 billion debenture this month. How much debenture do you need to issue more this year? And what is the second possible funding source or either back up if you cannot grow over or get enough funding from the bond market, given the market is very volatile? I would say that we have just success in floating debenture of about THB 10 billion just last week. And actually, we got a very good response from the high network, and -- even though this is a very volatile period. So we still got some oversubscribe to this debenture. So we are quite confident that we could grow over on all the debenture become due this year. However, because as you may be aware that our free cash flow is still negative. So we need more funding. Certainly, we need more funding. And the bond market is also the priority for us to get more funding, together with our internal free cash flow. Apart from that, our source of funding would be from bank loan, some from bank loan, we are discussing with various banks to get working capital facility, which we got a positive response from bank as well. And apart from that, if you may see in our balance sheet, we have more than THB 20 billion tax refund -- to be refund from the revenue department. And so far, we get -- we expect to get about THB 10 billion to THB 20 billion refund from the revenue department this year. That would be the second or the third opportunity for our funding. And we also hold 29% in DIF unit, which the value of the investment is about THB 50 billion, and we can only tie those units if needed. So that is another funding source for us as well. And again, we can also monetize certain assets through DIF if we would like to do so. But at this moment, we still don't have plans to monetize more assets through DIF. So with those opportunities, we think that we have enough funding source to fund the CapEx, and even though to fund the bond that will become due this year. In case that there is the volatility in the market and we got difficulty in the bond market, we believe that we still have enough funding source to go through this volatile period. And next question is, what's the CapEx guidance this year? And for the planned, THB 40 billion to THB 60 billion CapEx you mentioned, can True finance this CapEx all by yourself? Would you need to seek a partner outside to help? How much -- or how much will by leasing capital? And when can we expect to turn free cash flow positive? I would like -- first, I would like to address on the THB 40 billion to THB 60 billion CapEx that we mentioned earlier, that the THB 40 billion to THB 60 billion CapEx is not the whole CapEx that we will invest in this year. This is over 3- to 5-year time frame. So we will invest in the area, which we have a lot of customers, which we have to fill up capacity that would be invest. We don't anticipate any big wave of CapEx investment like 4G or 3G that we have done in the past. These are purely to fill the capacity with 5G. So that would be a lot more cheaper than 4G. And in terms of the broadband, we already rolled our network to other countries. So we will only invest in the area that our tech part has fully occupied. So meaning that our investment going forward will be very precise, and we will be very prudent in terms of CapEx investment. And if you need to seek partner or outside help, I would say that we have a very strong partner in terms of the network equipment. We have a very strong relationship with the partner. And we always use vendor financing, meaning that whatever investment this year, the cash payment will be almost over 5- to 7-year payment term. So it will be minimal cash payment for this year, even though we invest it in the 5G this year. And when can we expect to turn free cash flow positive? I would say that we expected to turn free cash flow positive during the next couple of year, meaning that our operating cash flow has turned positive last year. And this year, we expect more capital from operations and next year and the year after. So the cash flow from operation would remain cash flow positive for True. And vendor financing, and we would monetize some of the assets in our balance sheet, for example, the cash flow fund -- to fund for the cash flow negative during the next couple of year. And of course, we need to get more funding, but would be not in the big magnitude during the next couple of years because the cash flow from operations would improve, we expected that. So in short, we would expect free cash flow positive during the next couple of years. Please, update your cost initiative program. Is it possible to see your nominal cost expense to come down this year? Any internal target? I will say that our internal target is very aggressive, and I would like to keep it internal. And in terms of the initiative program, we already touched on that in our presentation. Initiative program improved more efficient in terms of marketing and selling, spending. In terms of the subsidy, we would be more prudent and more effective in terms of subsidy as well. With the new normal work from home, we see a lot of opportunity to improve productivities, meaning that our cost -- certain costs will reduce with the new normal. We also renegotiate content costs with our content partner. We revisit our network expense and try to reduce the expense relating to our network, the electricity costs, et cetera. And we also look at the regulatory costs as well. We believe that in terms of the costs relating to regulatory and license for Thailand, the cost is really high as compared to other countries. And we are the infrastructure play. We are the one who build infrastructure for Thailand. And we believe that those content is still too high. So we will work with the regulator, whether we can reduce those regulatory costs as well. And next question, is there any update on compensation by the EPL due to match delay cost cycle restriction? I would say that we are in negotiation with EPL, together with other broadcaster as well because we are facing the same situation. So we will work with other broadcaster and renegotiate with EPL how would they mitigate the impact to a broadcaster like us as well because we need to admit that the EPL, even though they resume the match, but the match with no audience at all. So the value of EPL may not be as high as the normal EPL. That is our concern as well. And we need to renegotiate with the content provider, not just the EPL, but other content and live sport as well. Next is on, during lockdown in many countries, have you experienced the disruption in your supply chain for user terminal equipment import from China? Khun Vichaow?

Before I answer that question, I will share with you that since a couple of years ago, the first supplier got into trouble was actually ZTE. And then they complied to all the requirements of the U.S. government, so they are fully resumed and that sort of thing. So since the experience and then followed by the trouble that Huawei have gotten into, so we have diversified our supplier base. And then we also have readjust our internal working procedures and our procurement practices. So with those being done and up till today, we actually have 0 interruptions at all, 0 interruptions at all. And not because we have done something right after the issue that I just mentioned, but that was planned since more than 2 years ago, right after the ZTE get into difficulties.

Next question. Heard you -- heard True award a 5G contract to Ericsson. Any specific reason do you require to diversify the vendor list from Huawei given the ban from U.S.A.?

Since day 1, what I mean is that since more than 26, 27 years ago, since the establishment of True Corporation at the time was called CP Telecom and then changed into TelecomAsia and then later on become True, we always have a multi-vendor policy and at least a dual-vendor policy. And with our market -- with the country the size as Thailand, we definitely need to have more than one supplier. So we always maintain a multi-vendor policy. At this very moment, we already awarded 3 contracts for the 5G to Ericsson, to ZTE and to Huawei. So the diversification, not because of the difficulties that facing us, that was a general policy of the company since day 1. So today, we have 3 suppliers, Ericsson, ZTE and Huawei.

So there's no further question from online. So I would like to -- okay, there's more questions. Can -- please, can you elaborate on THB 10 billion to THB 20 billion tax refund? Is that the tax you already paid? Yes, this is the withholding tax and VAT that we already paid and waiting for refund from the revenue department. And some of the refund has been like more than 5-year long. So we have talked to the government that they need to accelerate the refund process because it's our money. We are entitled to get those money back quickly as well. So this is -- that in short is yes, this is the money we already paid. We are waiting for a refund. Next question. How is 5G acceptance in Thailand? How much percentage of 5G subscriber for 2020 and 2021 in your view?

In terms of -- the fact of today is that there is a big buzz about 5G, but the actual users in the whole Kingdom of Thailand is probably in the tune of 10,000. So comparing to a subscriber base of 80 million, 90 million subscribers in Thailand, I think it's very small. It's very, very, very small. The expectation towards the end of 2020, I think it definitely will pick up, particularly when we start to roll out the 5G network. But I think the base is still very small, in relative terms, to the size of the market, it's relatively small. And even in the year 2021, the adoption rate may be still on the -- less than 10% or mainly in the teens range, basically the early adopters in the 5G. So our plan is actually to roll out the 5G network, not just to serve the new 5G users, the majority of the investment is actually to support the 4G subscriber base because 4G and 5G are going to coexist for a long time to come. So even the equipment and the frequency is 2,600 megahertz. And with the dynamic spectrum sharing, it supports for 4G, 5G seamlessly. So actually, invest in 5G today is much, much cheaper than invest in 4G.

Next, understand that 5G could uplift [ ARPU ] sizably in other countries. Do you expect to see that in Thailand? Or it is more challenging here?

I hope that we, as operators, we can come to our senses and we can talk sense into ourselves. So I think it's challenging but it's doable.

Next is please share the 5G lesson you learn from China Mobile.

What we have learned from China Mobile is manyfold. Is that, like in China Mobile, they are rolling out 5G in big times. But the overwhelming majority is for 4G subscriber base, as I mentioned earlier. China Mobile actually has 140 meg of 2,600 meg or 2.6-gig frequency band. And they allocate the overwhelming majority for 4G at the moment. And then when their 5G subscribers start to pick up, then they will be using the dynamic spectrum sharing. So they actually invest in 5G, but it's for both 5G and 4G simultaneously, and which is a very good lesson for us. That's why that at this very moment, we stopped investing in 4G anymore. Now we put in 5G equipments, but then there are -- 70% of the handsets in the Thai market already supports the 2.6-gig megahertz band. So those 4G subscribers can all see a huge improvement in their experience, even though they are using 4G, so -- which is tremendous. That's what we have learned from China Mobile. And China Mobile also shared with us definitively is that the actual success story will come from vertical solutions. It obviously helps the consumer market and help to increase the bandwidth and that sort of a thing. But the overwhelming benefit will come from vertical solutions. Those who will see a new s-curve, able to see. The revenue stream will be substantial if the vertical solution come to fruition. And as we mentioned in the presentation, we actually focus on 5 or 6 key vertical solutions. But today, it still is infancy. We are still on the trial-and-error basis and on the formative stage. But when the vertical solutions become accepted by the industries, there will be a tremendous uplift in the revenue base.

Next, how much of the 2,600-megahertz spectrum is used for 5G?

At the very moment, it's not much. We allocate the majority to support 4G because the user base is very small. And when -- starting next month, we will install the feature for dynamic spectrum sharing, band doesn't matter. If there's no 5G users, the entire spectrum will allocate for 4G. If the 5G users used up 10% then 10% for 5G, if they use up 20%, 20% will be for 5G. So it's dynamically allocated.

Next, why would you opt out of 3.5 gigahertz, which is the de facto in other countries?

I'd like to share you with this is that in the early stage of the 5G standard, the 3.5 gig is considered as the de facto standard. But as you can see, that once China adopts 2.6 gigahertz as its main spectrum, then -- as of today, perhaps more than 50% of the 5G subscribers actually in China. And more than 50% of the total network capacity on 5G is actually in China. So the equipment cost and the ecosystem and the whole supply chain, the equipment, actually, the cost drops tremendously. We used to be quite afraid of the 5G investment in the pre-5G era. We actually think about the equipment will be 3x more expensive. And as of today, it's only 1.1 or 1.2x of 4G, but the capacity is more than 3x. So the relative investment is much, much cheaper. So right now 2.6 gig and 3.5 gig are the de facto standards for 5G today.

There is no more question today. So I would like to thank you very much for your participation and looking forward to seeing you next quarter. Thank you.

Thank you. [Foreign Language]

[Foreign Language] [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]