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

Good afternoon and welcome to True Analyst Conference for the Second Quarter Results of 2021. I'm Yupa Leewongcharoen, Group CFO. And with me today are our 3 Co-Presidents, Khun Natwut; Dr. Teeradet; and Khun Manat. Let's start with a brief summary of our Q2 results. The second quarter was challenging with the new wave and rapid spread of COVID-19 pandemic affecting the overall economy and various sectors. Despite this, True Corp core performance improved along with strong EBITDA and margin growth, mainly driven by cost control efforts. Yet we still have more room for improvement. And we work more aggressively to optimize costs and significantly increase bottom line performance. TrueMove H was the top performers, growing service revenue, while the overall industry saw flat to declined revenue trends, 5G [ base ] install momentum, increasing user base by roughly 43% Q-on-Q to 1 million. TrueOnline add another 105,000 broadband subscribers, and we'll leverage device innovation as well as in-depth analysis to further ride on-demand for work and learn from home. True Digital Group continue to expand user base and partnerships. Its flagship digital media platform, TrueID, maintained the cost of double-digit revenue growth on its more than 25 million monthly active users. The premium subscription package combining strength of both on-demand content from TrueID+ and premium live TV from TrueVisions NOW is expected to drive higher growth in OTT market. At the same time, True Digital Solutions saw increasing demand for IoT and digital solution across various industries, resulting in another quarter of solid revenue trend. Now moving on to the financial performance. We saw an economic impact on both consumer and corporate customers from the new wave of COVID-19, particularly at TrueVisions and prepaid subscribers. But we were able to maintain service revenue at around THB 26.6 billion in this quarter. Expense above EBITDA continued to decline, along with our ongoing effort to become more lean and manage cost more efficiently, especially cost relating to network roaming, sale and subsidies, content as well as personnel. As a result, EBITDA increased 4.5% Q-on-Q and 12.5% year-on-year to THB 14.3 billion, with consecutive growth of EBITDA margin on service revenue to 55.1%. Core earnings improved, although still a loss. But we believe we are on the right path for growing profitability in a sustainable manner, with key strategies Khun Manat will touch on towards the end of this presentation. Next, our President will go through performance of our key business, starting with Dr. Teeradet for mobile business performance.

Thank you, Khun Yupa. For the mobile segment, TrueMove H continued to outperform the industry in both revenues and also subscriber growth. Its service revenue increased by 1.2% Q-on-Q and flat year-on-year at THB 20.2 billion, while the overall industry saw flat to declined revenue trend. Our postpaid revenue and subscriber base have grown well, while 5G start to put more meaningful contribution, which I will talk about in a moment. TrueMove H expanded its total subscriber base to 31.7 million, gaining 489,000 net added into the second quarter, driven by strong postpaid acquisition of 352,000, representing of 47.4 of the industries. Prepaid competition, however, remain intense and customer are still being cautious on their spending. More targeted and also synergies campaign with our partners should mitigate these challenges, and we are hopefully for the market to rebound very soon. Just focusing on this, TrueMove H remained the dominant player and gained fair share in the 5G premium market. In the second quarter, 5G user are connecting to TrueMove H network grew faster than expected, to over 1 million with ARPU uplift of 15% approximately. This progressive acquisition was a result of our 5G superiority with the most network coverage. We have been prudent in terms of 5G spending and technological advancement allows us to better use of CapEx, with less spending compared to 5G -- sorry, 3G and 4G eras. We mostly focus on a key city and dense area like BMA, EEC with 98% and 95% population coverage, respectively. Apart from network strength, our analytics capability really help us on target the customer in each of the segment with an engaging privilege more precisely. We also add value content to customers in addition to and access to entertainment and especially an exclusive sport content from TrueID and TrueVisions such as music, travel and lifestyles. Gaming, especially from online station combined with our recent partnership with Bitfrost Cloud from China, which allowed gamer to enjoy the 5G cloud gaming experience on their smartphone at any time. With more 5G handsets and IoT device at affordable price, bundled with offering to our content magnet, as well as educational content from famous tech gurus, we believe that the mass 5G adoption is not too far. Let's look at the enterprise and 5G solution. We continued to expand partnership to develop more use cases and build 5G ecosystem. Recently, we signed an MOU with KT Corporation, the leading telecommunication provider from South Korea, to co-develop digital innovations, targeting B2B and B2T customers, starting off with enterprise LTE and 5G services that secure clients' data by separating network for B2B customers from regular customers and connecting to the company's intranet directly. The collaboration will expand into intelligent CCTV and the Smart Energy in the latter phases. For Industry segment, we partnered with Mitsubishi Electric and LertVilai to build a 5G smart factory prototype with full automation system onto 5G private network. At the same time, we work cohesively with the government entities to develop smart projects in several industries such as smart agricultural and also smart hospital. Now let's look at broadband Internet segment. TrueOnline added 105,000 net subscribers and expanded its broadband subscriber base to 4.4 million. Its broadband revenue grew nearly 10% year-on-year and 2% Q-on-Q to THB 7.3 billion as a result. This solid growth was driven by our ongoing effort on utilization advanced technology as well as an in-depth analytics for proactive maintenance and value-driven propositions. We will continue to enhance customer experience through innovative device, particularly the recent launch of the 2 Gigatex Fiber PRO with WiFi6 router and the new chipset that provide greater speed of connection as well as adding value from TrueID TV and TrueVisions premium content, to capture growth from the home entertainment with a higher revenue per account for the True Group.

On Digital Businesses, as shown -- has shown progressive growth with TrueID being the key engine as it continues to strengthen content library on this platform. As a super app for all users, TrueID achieved higher scale with more than 25 million monthly active users and 265 million monthly video views on average, while TrueID TV expanded further with over 2.5 million boxes at customer premises. Total content sales transaction were 372,000, softened Q-on-Q on seasonality with the English Premier League season ending, but grew 41% year-on-year with growth from both entertainment and sport content. This drove TrueID revenue up 77% year-on-year and 15% Q-on-Q in the second quarter. To capture higher growth and better respond to users' preference and lifestyles, the premium subscription packages were launched combining the best 2 entertainment worlds from, number one, TrueID+ for on-demand entertainment with over 4,000 hit content. And secondly, TrueVisions NOW, a streaming premium content that serves all generations in the family. Customers can watch content anywhere and anytime on our omnichannel platforms, including TrueID application, website and TV boxes at home. We hope that this value-driven package and our leading position as the king of content and king of sport will drive more meaningful revenues in the near future. For enterprise segment, True Digital Solutions revenue grew in double-digit rate, both Q-on-Q and year-on-year, along with expanding IoT endpoint and devices connectivity. We consistently develop innovative services and solutions to our customers in various industry verticals. In June, for example, we officially launched True Drone with promising response to help improve efficiency and lower cost of crop spraying for farmers. True Smart Living Solutions will also blend into elements of IGAN Premium [Foreign Language] Development Company, uplifting residents' living experience with our IoT automation system, particularly smart security and monitoring management. Additionally, True Smart Energy Management enables properties to efficiently manage energy consumption and reduce spending. The solutions prove to save energy cost of around 5% to 10% on average and employee time of up to 360 hours per month for our retail outlets. Let me hand over to Khun Manat for the key strategy part.

Thank you, Khun Natwut. To carry on the positive momentum and even put higher acquisition across all of our products, we will continue to focus on digital transformation and end-to-end experience for our customers in our segments by leveraging our complete and expansive ecosystem with high-quality telecommunication and digital infrastructures, digital content and media as one of our key competitive edges, while adopting AI and data analytics capability to provide personalized offering and privileges that match the needs of customers and businesses, as well as for active maintenance and retention. At the same time, we are focusing on digital services and sales, particularly [ conversational ] commerce in response to rising demand for online transactions. As well as expanding channels with strategic and business partners, the new one being Lotus nationwide footprint to efficiently reach customer and adapt well to competitive dynamics in each area. Last but not least, cost and productivity improvement remains our key priority. Whether they be costs relating to network roaming or payment to a regulator and state enterprise leveraging [ window level ], energy to save sidelining costs like solar cell, manpower productivity and sharing across various units, marketing spending effectiveness as well as the other initiative following COVID-19 pandemic, like office space consolidation e-build, digitalization. All this should accelerate our growth potential with a stronger financial footing. This concludes today's presentation. We will now open the floor for the questions.

Starting with question #1, "Please update your core revenue growth and earning turnaround target." Despite a loss in the first half, cost control measure led us to record low loss in the second quarter. And we are working more aggressively to become more lean and optimize all cost categories to the appropriate level. And of course, without affecting the revenue. With key items mentioned earlier, like network consolidations, roaming and payment to regulator or state enterprises, results channel optimization and digitization, as well as more saving from after consolidation following the work from home behavior. We see good progress of those initiatives and expect more significant contribution from them in the second half. As for the revenue line, the target is quite challenging and also depend on economic aspects. For example, the economic recovery ramp-up of nationwide vaccination programs and so on. Right now, we aim for low single-digit growth in service revenue this year, providing the economic situation. We are working in every way to make sure we leave positive bottom line in the second half of this year. Next question, please. This question is for Dr. Teeradet. "On 5G, Advanced is about to launch its 5G house band with more affordable price point. What will be True's 5G [ proprietary ] handset [ for customers ]?

Thanks, [ Khun Yupe ]. Our 5G strategies would remain and really focused on to partnering with our trusted international brands with exclusive models, which will be like up later this or next month onward. The price point will be surely affordable and that approximately in the mid-1,000s range.

Next, please. "You mentioned that the client 5G user reached 1 million as of Q2, which already hit your previous target. What will the new 5G target by the end of this year? And what will be your key driver to achieve this number? Please also share your 5G device pack?" Dr. Teeradet?

Sure, Khun Yupa. Well, we expect to continue aggressively the momentum of our 5G acquisition, and we believe and we are leading the 5G market, offering the consumer with superior experience through our 5G most coverage combined with our key magnet on comprehensive range and exclusive content. We also strengthened our data analytics capabilities and our synergy channel with Lotus on top of 7-Eleven and Makro with the nationwide footprint and no lockdown effect. We also expect more affordable 5G handsets and IoT device as mentioned earlier. This should make us double the 5G user base by the end of this year. As the 5G device, it's also over 1 million. And as we're trying to drive acquisitions on our customer with 5G device first, attract them to subscribe to our 5G package, so then they can get the best 5G experience. The Thai market is still really beginning stage of the 5G cycle, and the 5G devices are still expensive in comparison with 4G at the moment. But with the more affordable models and handsets are coming as mentioned earlier, this will also scale up and we'll be a lot higher than this.