Thaicom Public : Management Discussion and Analysis Quarter 2 Ending 30 Jun 2022 (revised)

Management's Discussion and Analysis: THCOM

Management's Discussion and Analysis for Q2/2022 Results

Thaicom Public Company Limited

I. Overview

Performance overview

For Q2/2022, Thaicom Plc (the Company or THCOM) recognized core profit (operating profit excluding the effect from foreign exchange, share of profit of investment in joint ventures, and extra items) of Baht 200 million, significantly increased compared with the loss in Q2/2021 (YoY) of Baht (86) million. This was because of the structural change in operating cost after concession ended, which resulted in decreases of satellite depreciation and concession fee. The core profit for Q2/2022 increased 45.3% compared with that of Q1/2022 (QoQ) of Baht 138 million, due to the increase of operating revenue, together with efficient cost management.

THCOM's consolidated revenue from sales of goods and rendering of services for Q2/2022 was Baht 737 million, decreased by 7.4% from Baht 796 million for Q2/2021 (YoY), mainly due to ramp down of broadcast customers. However, the revenue increased 6.6% compared with that of Q1/2022 (QoQ) of Baht 691 million due to the increase in service revenue from international customers

During Q2/2022, the Company was significantly affected by foreign currency exchanges. THCOM gained Baht 229 million from Thai Baht depreciation against the US Dollars due to the amount of Dollar assets of the Company exceed its Dollar liabilities. On the other hand, Lao Telecommunications Public Company (LTC), the joint venture in Lao PDR, recognized a significant loss from Lao KIP depreciation against US Dollars due to the marked-to-market on its Dollar liabilities and THCOM recognized this loss via share of loss of investment in joint ventures of Baht (104) million. Taken off the foreign currency effect, LTC performance recovered from last year due to significant growth of the teenage segment from "T- PLUS" brand and LTC continuously generated positive operating profits.

Taking into consideration the gain from foreign currency exchange, THCOM reported net profit for Q2/2022 of Baht 309 million, increased by 511.2% compared with that of Q1/2022 (QoQ) of Baht 51 million, and also improved from the loss in Q2/2021 (YoY) of Baht (41) million.

II. Business Summary

Satellite and related Services

• During Q2/2022, the Company and NXT Digital Limited (NDL), a company in Media & Digital Vertical of Hinduja Group, which is one of the largest conglomerates in India, signed a Memorandum of Understanding (MOU) to form a strategic partnership to enter the Broadband-over-satellite market and related services in India via OneOTT Intertainment Limited (OIL), the broadband subsidiary of
  NDL and India's third largest private Internet Service Provider (ISP) with over 1 million customers. The service will focus on providing quality broadband not only to rural markets but also underserved regions facing connectivity challenges.

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Management's Discussion and Analysis: THCOM

India is one of the largest target markets for THCOM with high growth potential due to its broad landscape with connectivity challenges suitable for broadband-over-satellite. This partnership is not only providing business opportunities for the Thaicom 4 satellite but also enhancing the potential utilization of a new High Troughput Satellite (HTS) with Indian market future demand.

The partnership with NDL also included global emerging solutions for India ranging from Satellite AI solutions comprising space-based data technologies for agriculture and natural resource management to public WIFI and drones for augmenting rural digital solutions. NDL and Thaicom will also look to setting up a Centre for Excellence to develop new satellite and related digital based technologies using artificial intelligence and analytics.

• THCOM announced the deployment of LEO satellite Internet of Things (IoT) Solutions, the first collaboration project with Globalstar Inc., a global LEO satellite operator and a leading provider of satellite IoT solutions. LEO satellite IoT solutions are aimed at improving personnel safety and management for tourism in Thailand as well as the maritime industry in the region. In response to the government's plan to fully reopen the country after the easing of the COVID-19 situation, the solutions will be deployed first in Phuket and then expanded to other tourist destinations in the country.
  The satellite-based tracking system was designed to safeguard tourists. Water tourists must carry a tracking device while on the water; the tracking device is installed with the life jacket. In an emergency, with the press of a one-touch SOS button, an alert is instantly sent to Marine Services, the government authority responsible for maritime safety, along with the user's GPS location coordinates. This project was built on the collaboration agreement with Globalstar on the establishment and operation of ground facilities in Thailand, which was announced in Q1/2022.

At the end of Q2/2022, the Company's conventional satellites providing services under telecommunication licenses were Thaicom 7 and Thaicom 8. The overall utilization rate was 52%, slightly declined from 54% for the end of Q1/2022.

Internet and media Services

The revenue from internet and media services mainly comes from Thai AI, which are the income from the sale of set-top-boxes and related equipment, including the sale and rental services for internet platform such as IPTV channels, video streaming, eSport and LOOX TV.

Telephone business abroad

As of the end of Q2/2022, Lao Telecommunications Public Company (LTC) reported its total mobile subscribers of 2.16 million, slightly increased in comparison with the subscribers as at the end of 2021 of 2.01 million.

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Management's Discussion and Analysis: THCOM

III. Consolidated Operating Results

Summary of key financial information of THCOM

	Unit: Baht million			Q2/			Q1/			Q2/			QoQ			YoY			6			6			YoY
													months			months
			2022			2022			2021			(%)			(%)							(%)
														2022			2021
Revenue from sales of goods and	737		691		796		6.6%		-7.4%		1,427		1,584		-9.9%
rendering of services
Cost of sales of goods and	(377)		(349)		(650)		8.0%		-41.9%		(727)		(1,299)		-44.1%
rendering of services
Normal SG&A expenses(1)	(188)		(201)		(222)		-6.7%		-15.2%		(389)		(427)		-8.8%
	EBIT from normal operations			171			140			(76)			22.5%			-325.4%			311			(142)			n.a.
Other income	8		6		5		33.7%		60.7%		14		61		-77.4%
Gain (loss) from foreign exchange	229		(23)		71			n.a.	223.3%		206		222		-7.2%
	EBIT from operations			408			123			(0.2)			232.8%			n.a.			531			141			276.9%
	EBITDA from operations(2)			347			347			252			0.0%			37.7%			693			523			32.4%
Finance income	33		28		36		18.2%		-9.1%		61		66		-8.6%
Financial costs	(28)		(28)		(40)		1.7%		-28.7%		(56)		(80)		-30.1%
Provision for doubtful debts and
reversal of loss on impairment (loss	16		63		(12)		-74.2%			n.a.	79		(11)			n.a.
on impairment) (3)
Share of profit of investment in joint	(104)		(74)		(4)		41.4%		2336.4%		(178)		(20)		793.7%
venture
	Profit (loss) before income tax			325			112			(20)			190.7%			n.a.			436			96			353.7%
	expense
Income tax expense	(15)		(61)		(22)		-74.6%		-28.2%		(77)		(26)		193.5%
	Profit (loss) attributable to owner of			309			51			(41)			511.2%			n.a.			360			70			413.3%
	the Company
	Earnings (loss) per share (Baht)			0.28			0.05			(0.04)			511.2%			n.a.			0.33			0.06			413.3%
	Core Profit (4)			200			138			(86)			n.a.			45.3%			338			(106)			n.a.

1. Normal SG&A expenses: Selling and administrative expenses, including directors and management benefit expenses.
2. Excluding gain (loss) from foreign exchange and loss from assets impairment.
3. Reversal of loss on impairment for Q1/2022 was from debt collection of long-overdue account receivable from foreign customers.
4. Core Profit means EBIT from operations + financial income - financial cost - provisions for doubtful debts - extra items

Revenue from sales of goods and rendering of services

The consolidated revenue from sales of goods and rendering of services for Q2/2022 was Baht 737 million, a decrease of 7.4% from Baht 796 million in Q2/2021 (YoY), and compared with Q1/2022 (QoQ) the revenue increased 6.6% from Baht 691 million. This was mainly affected by the revenue from satellite and related services

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Management's Discussion and Analysis: THCOM

During the first 6 months of 2022, the consolidated revenue from sales of goods and rendering of services was Baht 1,427 million, decreased by 9.9% from that of the same period of 2021 (YoY) at Baht 1,584 million, due to the decrease in satellite and related services revenue.

	Revenue from sales of goods			Q2/			Q1/			Q2/			QoQ			YoY			6 months			6 months			YoY
	and rendering of services
			2022			2022			2021			(%)			(%)			2022			2021			(%)
	Unit: Baht million
Satellite and related services	735		690		795		6.5%		-7.5%		1,425		1,581		-9.8%
Internet and media services	8		7		7		2.5%		10.3%		15		15		1.1%
Consolidation eliminations	(7)		(6)		(6)		3.1%		12.6%		(13)		(12)		9.6%
	Total			737			691			796			6.6%			-7.4%			1,427			1,584			-9.9%

After the expiry of the concession, revenue from satellite and related services comprised of revenue from sales of goods and rendering of services from Thaicom 7 and Thaicom 8, which operated under licenses to provide telecommunication services. Besides, there were revenue from satellite services from part of bandwidth purchased on Thaicom 4 and Thaicom 6 satellites from National Telecom Public Company Limited, including bandwidth purchased from international satellite service providers in order to continue providing seamless service both broadcast and broadband.

The revenue from satellite and related services for Q2/2022 was Baht 735 million, a decrease of 7.5% from Baht 795 million for Q2/2021 (YoY), mainly due to the decrease of broadcast customers. However, the revenue from satellite and related services for Q2/2022 increased 6.5% from that of Q1/2022 (QoQ) because of the increase of occasional satellite-related services provided to an international customer, together with the benefits from Thai Baht depreciation against US Dollar since part of the Company's revenue was linked to Dollar currency.

During the first half of 2022, the revenue from satellite and related services was Baht 1,425 million, a decrease of 9.8% from that of the first half of 2021 (YoY) of Baht 1,581 million, due to the ramp-down of broadcast customers, while the revenue from broadband customers was maintained.

Internet and media services

For Q2/2022, the revenue from internet and media services was Baht 8 million, increased from Baht 7 million as of Q2/2021 (YoY), resulting from an increase of revenue from eSport, offsetting with a decline of revenue from broadband and television network and system integration services.

Cost of sales of goods and rendering of services

The Company reported the consolidated cost of sales of goods and rendering of services for Q2/2022 of Baht 377 million, decreased by 41.9% compared to Baht 650 million for Q2/2021 (YoY). The cost during the first half of 2022 was Baht 1,299 million, also decreased 44.1% compared to Baht 727 million during the same period of 2021 (YoY). This was the result of the drop of revenue, together with the decrease of concession fee to the Ministry of Digital Economy and Society and depreciation of satellites after the expiry of the concession.

Compared with Q1/2021 (QoQ), the consolidated cost of sales of goods and rendering of services increased 8.0%, in line with revenue increase.

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Management's Discussion and Analysis: THCOM

	Cost of sales of goods and			Q2/			Q1/			Q2/			QoQ			YoY			6 months			6 months			YoY
	rendering of services
			2022			2022			2021			(%)			(%)			2022			2021			(%)
	Unit: Baht million
Satellite and related services	380		351		652		8.2%		-41.7%		732		1,302		-43.8%
Internet and media services	4		4		3		17.1%		19.9%		8		9		-16.5%
Consolidation eliminations	(6)		(6)		(6)		-6.3%		5.2%		(12)		(12)		3.3%
	Total			377			349			650			8.0%			-41.9%			727			1,299			-44.1%

Cost relating to satellite and related services for Q2/2022 was Baht 380 million. A drop of 41.7% from Baht 652 million for Q2/2021 (YoY) contributed by a decrease of depreciation of Thaicom 4 and Thaicom 6 satellites, and concession fee to the Ministry of Digital Economy and Society after the end of the concession period. In comparison with Q1/2022 (QoQ), the cost of satellite and related services increased 8.2% from Baht 351 million in accordance with an increase of revenue.

The Company reported the cost relating to satellite and related services for the first half of 2022 at Baht 732 million, decreased by 43.8% comparing with that of the first half of 2021 (YoY) at Baht 1,302 million, as a result of the decrease of satellite depreciation and concession fee.

Cost of internet and media services

Cost relating to the internet and media services for Q2/2022 were Baht 4 million, an increase from Baht 3 million from Q2/2021 (YoY), in line with revenue increase.

Selling and administrative expenses

The SG&A expenses, including directors and management benefits, were Baht 188 million for Q2/2022. A decrease of 15.2% from Baht 222 million for Q2/2021 (YoY) and 6.7% from Baht 201 million for Q1/2022 (QoQ), were mainly due to the decrease of legal fee, together with general administrative expenses from effective cost management.

Finance costs

Finance costs for Q2/2022 was Baht 28 million, a decrease of 28.7% from Baht 40 million for Q2/2021 (YoY), mainly due to the repayment of debenture in Q4/2020 of Baht 2,275 million. The cost was maintained in comparison with Q1/2022 (QoQ).

Share of profit of investment in joint venture

The share of profit (loss) of investment in joint venture consisted of those from LTC, Nation Space and Technology Co.,Ltd and ATI Technologies Co.,Ltd

During Q2/2022, the share of profit (loss) of investment in joint venture was Baht (104) million, decreased from Baht (4) million and Baht (74) million for Q2/2021 (YoY) and for Q1/2022 (QoQ), respectively. During the first half of 2022, the share of profit (loss) of investment in joint venture was Baht (178) million, decreased from Baht (20) million for the first half of 2021 (YoY). This was mainly due to the loss from share of profit of investment in LTC regarding an appreciation of US Dollar against Lao Kip, resulting loss from mark-to-market of its US Dollar liabilities.

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