About

Registered name	Advanced Info Service Public Company Limited
Headquarters	Phayathai, Bangkok, Thailand
Number of customers  (2020)	Mobile business – 41 million Prepaid- 31 million Post-paid – 10 million Fixed broadband business – 1.3 million
Business segments	Mobile business-Mobile network services on 2G/3G/4G and 5G Mobile phones and other devices sales,International roaming and International calls Fixed broadband business– Fibre broadband for home and SMEs Digital service business – (1) Video platform (2) Internet of Things (3) Enterprise service-Cloud, Cybersecurity, IoT (CCI) and EDS (Enterprise Data Services) (4) Mobile money (5) Other platforms
Country in operation	Thailand
Distribution and Sales Channel	Retail Outlets (AIS shop)- 201 locations Wholesale distributors- 16000 Distributors Direct Sales and Telesales Online channels
Revenue by major business units (2020)	Total revenue 2020 – USD 5384.11 million Mobile business – USD 3,542.46 million Fixed broadband business – USD 208.77 million Enterprise and other businesses – USD 314 million Interconnection and equipment rental revenue- USD 411.66 million SIM and device sales- USD 887.22 million
Market share- mobile services (2020)*	46%
Market capitalisation group (Dec 2020)	USD 15.7 billion
Revenue growth- CAGR (2016-2020)	3.25%
CAPEX (2020)	USD 886.04 million USD 1.11 billion (5G/4G network, FBB)
CAPEX as % of revenue	16.4 %
Estimated annual cloud infrastructure spend	USD 7.92 million
Annual cloud infra spend as % of revenue	0.14%
Cloud spend as % of IT	3%
IT spend – external (approximate)	USD 260.0 million
IT fixed assets (2020)	USD 376.16 million (AIS enterprise business)
Equipment and solution vendors	Major vendors- Huawei, Nokia and ZTE Other vendors- Cisco and Juniper

#1 Shareholder value(as of 31^st Dec 2020)

Operating revenue	USD 5,384.11 million
Revenue growth (2020)	-4.4%
EBITDA margin	44.3%
EBITDA margin change (ppt)	0.3 ppt
Net profit/(loss)	USD 852.6 million
Net profit margin	16%
EPS (USD/share)	USD 0.28
Price Earnings Ratio (x)	18.46
Free cash flow	USD 1921.4 million

A. Financial performance and growth

1. AIS witnessed a reduction in its revenue by 4.4%, mainly on account of a slowdown in the mobile business segment.
   • The tourist footfall drop impacted the operating revenues for the mobile business segment in Thailand because of the cross-border travel restrictions.
   • The decline in the overall revenue, aggravated further by lower sales of mobile phones, was the result of lesser spending power from the people during the pandemic. The decline in mobile phone sales aggravated the overall revenue dip.
   • The launch of 5G services in 2020 did not have much traction, constrained by the inability of its customers to switch to 5G smartphones.
2. The fixed services business noted a strong revenue growth of 22%, driven by remote work and online learning environments. This led to a 29% growth in the fixed broadband subscriber base during FY2020. AIS is expected to reach 1.6 million Fixed Broadband (FBB) subscribers at the end of FY21.
3. The enterprise segment also noted a marginal growth of 1% driven by increased demand for non-connectivity services.
4. Despite degrowth in revenues, EBITDA margin remained stable at 44.3% on the back of OPEX optimisation led by the following two reasons:
5. The decline in regulatory fees and prepaid commissions
6. Drop in marketing expenses, admin, and other expenses by 16% and 11%, respectively.
7. At the net level, AIS witnessed a strong performance. Also, the telco regularly pays out dividends to its shareholders. In the last five consecutive years, AIS on average paid out 75% of its net profits as dividends. However, since 2017, the pay-out ratio declined from 100% to the current levels to maintain enough cash for its 4G network maintenance and further 5G spectrum bidding.
8. On the prepaid ARPU front, the operator witnessed a decline of 7% from USD 7.56 in 2019 to USD 7.02 in YE2020 due to stiff competition in the overall industry, which pressurised operators to cut their tariffs down. However, the other two players, DTAC and TrueMove, witnessed an upward movement in their blended ARPU.
9. The overall liquidity position of the operator remained strong, marked by the current ratio at 0.45x. Also, the operating days improved from 57 days in FY2019 to 52 days in FY2020.
10. The debt coverage indicator marked by net debt to EBITDA and interest coverage ratio remained comfortable at 1.0x and 14x, respectively.
11. Outlook FY2021: Some traction in 5G adoption will lead to AIS pushing more value-added services in the market. However, only single-digit growth in both revenue and EBITDA may happen.

#2 Customer experience

We evaluate customer experience using four parameters explained below:

Fig 1 shows four parameters used to evaluate CX

A. Digital customer experience

1. AIS has been continuously developing its self-service app. In 2020, it aligned the app design to include lifestyles changes in consumer behaviour. Twenty million users have downloaded the app at the end of 2020, with 8 million active monthly users. My AIS app unique features, which enhances customer experience, include:
   • Express services and O2O integration
   • Machine learning to understand consumer buying behaviour and customer insights to provide personalised offers and deals that match the needs of the buyer
   • Access to exclusive privileges such as coupons and AIS points through a self-service app
2. During the pandemic, the operator simplified the KYC process for SIM cards -deliveries at the customer’s doorstep were possible by launching the GOMO application.
3. It is also aggregating content for a better digital customer experience through partnerships.
4. AIS launched eBiz Shop, an online store for AIS Business products and services to support enterprise and SME.
5. During the year, AIS strategically bundled new and popular content to its AIS play platform by collaborating with different partners. It also provided free content to its non-privileged customers as well.
6. The operator also ensured the availability of round the clock cybersecurity systems and personnel for both retail and corporate customers.

B. Network experience

AIS has an extensive 98% 4G network coverage in Thailand. The company is now directing its focus on 5G network growth while maintaining the 4G network. Other AIS successes include its 5G SA and NSA network rollouts last year, as well as being the first in the world to launch 5G on a standalone network. There is a subscriber target in the pipeline for 2021 for the company to reach a million high-value 5G subscribers, accounting for about 3% of the existing subscriber base. We expect growth for the company’s 5G coverage as more consumers adopt 5G smartphones.

Here are some key indicators of the network experience AIS offers:

1. In its first year of the 5G rollout, AIS has covered 16% of Thailand’s total population by deploying 5700 base stations, and it will continue to invest in the same. For 2021, AIS has set up a target of investing USD 0.75-0.90 billion in its 4G and 5G networks.
2. Availability of the right mix of spectrum in all frequency bands, including 900MHz, 1800MHz, 2100MHz and 2600MHz, would enable AIS to smoothly expand 4G and 5G, leading to improved network service capabilities. AIS has the largest spectrum available among the top three players in Thailand.
3. AIS is a leader in voice app and gaming experience as per the open signal recent report on Thai market network experience. However, for upload and download speed, True Move is in the first position. This remains an area of improvement for AIS.

C. Customer Service–

Apart from its regular contact services, AIS provides separate contact assistance for AIS Privilege customers.

D. Brand experience

1. In the 5G era, to sell IoT devices and other technology-based solutions to people, adopting digital-lifestyle flagship stores would play an important role. AIS forayed into the flagship store concept by opening its first store in 2020. The store has different zones with MAX, an AI robot as the Serenade Ambassador.
2. AIS is running a loyalty program to capture and engage high-value customers. It is known to be one of the best-in-class loyalty programs in the APAC region due to its ability to provide benefits beyond core telco services. AIS currently has 29000 partner stores to channel these privileges. To know more, read our exclusive report, Winning with customer loyalty programs – AIS Serenade Case Study.
3. Under the government’s “Thais say no to e-waste” campaign, AIS encouraged customers to deposit e-waste and offered them points in return.

#3 Employee experience

AIS consolidated its overall human capital framework by adopting the 5R strategy. Under this strategy, AIS would revamp its organisation structure, compensation structure, and hiring model to acquire more employees with digital skills, attract new talent and retain existing ones. The company would also reinforce its training and development program and provide employees with the flexibility to work from a place that is suitable and convenient.

Figure 3 shows twimbit’s five-point EX framework

Practiced empathy

1. The 5 R’s strategy that AIS has points out the right place to work – employees would have the flexibility to work at their convenience unless required otherwise.
2. The company ensures employee well-being by taking all necessary precautionary measures during COVID-19.

Culture

1. Over the last few years, it is noticeable that AIS has maintained a workforce ratio of 60:40, where 60% accounts for women employees and 40% for male employees. However, AIS lacks in women board member representation at a mere 9%.
2. The operator conducts an employee engagement survey every two years to make the required HR policy changes.

Employee as a customer

1. The L&D structure of AIS is more inclined towards on-the-job training, which accounts for 90% of the organisation’s total training, including learning from seniors. The remaining 10% are actual training programs conducted through seminars, workshops, or online applications – LearnDi and ReadDi.
2. The total cost incurred by AIS during 2020 is USD 0.34 million. However, the L&D cost per employee is low compared to global peers like Orange and Verizon, which incur 10 to 20 times more on the same. The L&D cost per employee at Verizon is 0.23% of its total revenue compared to 0.01% for AIS. Similarly, Orange has allocated an L&D budget of USD 1.82 billion for the next five years, at approximately USD 250 million per year.

Technology

AIS seems laidback in adopting technology for shaping the overall employee experience

Some of the steps taken by the operator during last year:

1. In 2020, AIS gave a thought to apply technology to human capabilities and took some actions. It introduced apps like WorkDi, which acts like an HRMS for its employees with basic functionalities like declaring leave, viewing total training time and receiving notifications for other information from the company.
2. The company also emphasised conducting activities for its employees. It launched an app called AIS DIGI, through which employees can engage themselves in an online society and participate in various activities.
3. Coupons to be used at the AIS canteen were made available through an app.

Rewards and benefits

1. AIS provides scholarships to the eligible children of its employees. In 2020, AIS incurred USD 214,440 on this program.
2. Performance appraisal done twice a year is the primary basis for deciding any changes to the compensation of employees. Apart from the performance position of an employee, and the employee as a person, there are also other factors for deciding remuneration. To carry out changes in the pay structure, the operator strives to understand the industry remuneration benchmarks through surveys.

#4 Digital transformation

Overall strategy

1. From a telecommunication service provider to a ‘Digital Life Service Provider’, the overall digital strategy AIS has is to serve individual and enterprise customers by leveraging 5G to build potential use cases and commercial solutions through a robust partner ecosystem. AIS has previously signed an MOU with Nokia, Huawei, and ZTE to test 5G and develop use cases.
2. Other than 5G, the operator favours adopting technologies like AIML and RPA (Robotic Process Automation) for its internal operations. Lastly, we note that the operator also places high emphasis on cyber wellness and data privacy.
3. The operator has a separate digital unit with a flat structure responsible for developing innovative platforms to support solutions like 5G IoT, AR, VR, Blockchain, and robotics.

Steps AIS took in 2020:

1. Partnerships to drive digital transformation for retail and commercial solutions:
   • Partnered with Microsoft to deploy enterprise solutions amidst a constant change in the working of organisations.
   • Signed a deal with BOSCH for building smart manufacturing factory in EEC corridor, Thailand
2. Expanded NB-IoT network across the country for smart home solutions. Apart from home solutions, AIS is also working together with various educational institutions to build other solutions
3. Supporting growth in the ICT industry ecosystem both in the medium and long term. In 2020, AIS invested over over USD 4.86 million (THB 162 million) for research and development of innovations with an emphasis on IoT, Smart Industries and Microservice systems Going forward, investment target for R&D in 2021 will be at THB 200 million.
4. Launched a digital framework for deploying digital solutions in the SME industry.
5. Under its 5G strategy, gaming, e-sports, and commercial solutions are the preferred verticals for AIS.

Cloud strategy

The virtualised network at AIS is huge, with an estimated 65 per cent virtualisation as well as an outstanding data center network. Given the opportunities with 5G, the company is now embarking on a major digital transformation initiative, one which will likely pave the way for a more ambitious public cloud and multi-cloud strategy.

The Cloud strategy AIS has for the next few years will follow these steps.

(a) private 5G network

(b) OSS BSS Transformation

(c) Building cloud transformation capabilities.

In the immediate future, the operator is looking at doing the following:

• Decide on a partnership with hyperscalers to leverage innovation capabilities.
• Review its OSS/BSS stack. However, the type of cloud adoption, whether hybrid or public, would be decided what regulations would allow for.

Current and future cloud spend and vendor insights

In today’s landscape, AIS remains a conservative cloud spender andrelies heavily on on-prem, self-hosted capabilities for its internal and external operations. On a monthly basis, we estimate AIS spends approximately USD 670,000 on cloud services, inclusive of hosting, traffic management, content delivery and SaaS applications. Also, it is important to note that applications from international partnerships, namely Netflix, are mostly hosted on public cloud services. Among public cloud vendors, the operator seems to have a preference towards AWS.

Prediction on AIS potential spend on the cloud by 2025

#5 Society and planet Impact

1. The company aims to increase the share of renewable energy usage to 5% of total energy consumption by 2023 compared to 0.06% in 2018.
2. The operator targets to reduce GHG emissions intensity (as calculated from the ratio of direct greenhouse gas (GHG) scope 1 and scope 2 emissions to data by 90% by 2022 compared to the baseline in 2015.
3. AIS intends to reduce the e-waste from its internal services and operations to 3% of total waste. It also encouraged the people to participate in this collective purpose of e-waste reduction in Thailand by providing e-waste drop points at 2400 locations.
4. AIS built an app for public health volunteers to provide them with the latest health updates and solutions.
5. The company is fostering cybersecurity awareness among youth to mitigate cyber threats or cyberbullying through online courses at no cost.

Organisation structure: leadership

Executive Profile

Kan Trakulhoon, Chairman, board of directors – AIS

Kan Trakulhoon, appointed in 2016, is one of the independent directors having no direct relationship with the management. He is also the chairman of the leadership development and compensation committee. Apart from AIS, he is also serving as director in four other listed companies. Mr Trakulhoon completed a bachelor’s degree in engineering (electrical) with First – Class Honors from Chulalongkorn University, and a Master’s degree in engineering and management from the Georgia Institute of Technology, U.S. Trakulhoon is also a top executive member for several leading organisations, including as President and CEO of Siam Cement PCL and Director of Kubota Corporation (Japan). Trakulhoon also serves on the boards and committees of several major government organisations.

Quotes

“AIS is committed to operate business sustainably in support of a transition to a digital economy, providing guidance on cyber wellness and promote awareness of the proper E-Waste disposal, serving as a clear model in the telecommunications industry in support of national development across all sectors for sustainable growth.”

Somchai Lertsutiwong, Chief Executive officer/Acting Chief Strategy Officer

Mr Somchai Lertsutiwong is Chief Executive Officer, Acting Chief Strategy Officer, Executive Director of Advanced Info Service PCL. He was Chief Marketing Officer in the Company from April 1, 2012, to July 1, 2014. Somchai holds a Bachelor of Business Administration in Marketing from Chulalongkorn University and an MBA from Chulalongkorn University.

Quotes

“There are two things AIS will pursue. Firstly, we will improve everything about the “connection” business, such as Fixed Broadband and AIS Fibre. Secondly, we will develop digital platforms, because this has been our pursuit for a long time. We really want to develop great digital platforms, something we have already seen in the world, but are not successful on this front yet.”

Sanjay Thomas, CIO – AIS

Sanjay Thomas is the first Chief Information Officer in the history of AIS. He is leading AIS Digital and IT strategy and is responsible for the digital transformation of the company. Formerly worked with IBM and reports to the CEO. He has considerable leeway in decision making and is responsible for the overall transformation agenda. He will drive the big-ticket decisions in partnership with the CEO.

Appendix

We define growth as a telco’s ability to lead on the following five pillars successfully. For the comprehensive evaluation of an operator’s performance, we have further identified metrics for each pillar.

End Notes

Advanced Info service (2020, Dec 31). Annual report.

https://investor.ais.co.th/misc/ar/2020/20210225-advanc-ar2020-en.pdf

Advanced Info Service (2020, Dec 31). Sustainability report

https://investor.ais.co.th/misc/sustainability/20210225-advanc-srd-2020-en.pdf