Mass-transit: the engine propelling BTS Group’s success
BTSC comprises almost two-thirds of BTS Group’s operating revenues and is the anchor upon which the group’s complementary businesses in media, property and services derive further value and opportunities
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With a reported market capitalisation of 102.7 billion Thai baht (HK$25.6 billion) in mid-2017 through four complementary business units growing in conjunction with Thailand’s continuing urbanisation, BTS Group has been on an upward trajectory over the past few years. Central to the group’s success is its mass transit subsidiary, Bangkok Mass Transit System (BTSC).
Responsible for improving Bangkok’s quality of life through safe and punctual mass transit solutions, BTSC comprises almost two-thirds of BTS Group’s operating revenues and is the anchor upon which the group’s complementary businesses in media, property and services derive further value and opportunities.
BTSC is the sole concessionaire, exclusive operator and largest stakeholder in revenues for the BTS SkyTrain’s core network – comprising 23.5km of elevated tracks and 23 stations forming the Silom (dark green) line and Sukhumvit (light green) line running through the heart of Bangkok’s commercial, business and tourist districts.
“Over the last 18 years, we’ve seen that mass transit in Thailand is a very stable and volatility-free business,” says Surapong Laoha-Unya, BTSC’s CEO. “Our revenue growth has been very stable despite periods of political instability and economic uncertainty, and our ridership growth has risen by 9 per cent per annum on average over the last 16 years. I think this is because BTS SkyTrain is the first mass transit system in Thailand with the best location in Bangkok’s central business district.”
With a 65 per cent ridership market share in Bangkok, BTSC was also granted permission by the Bangkok Metropolitan Administration (BMA) to operate and maintain two existing extensions of the BTS SkyTrain core network – a 7.5km extension to the Silom line with six stations and a 5.25km extension to the Sukhumvit line with five stations. In addition, BTSC is the sole concessionaire of Bangkok’s inaugural Bus Rapid Transit (BRT) line – encompassing 12 stations with buses running along a 15km-long dedicated bus lane.
The mass transit industry leader also recognises its responsibility to continuously innovate and improve its services.
Apart from installing a wireless signalling system, BTS Group also launched a “money to mobile” top-up option for passengers who travel in its network called Rabbit Line Pay, aimed at reducing station congestion, minimising costs and enhancing customer service. The company is also working on a mobile application that will include information on train arrivals.
“Innovation in our business means monitoring and improving our services to cope with annual increasing demand while balancing the economics of investment,” Surapong says. “We try to invest in technologies that simultaneously improve the quality of our services and help us reduce costs.”
Spurred by Bangkok’s rising demand for commuting solutions and the Thai government’s plans to increase the size of Greater Bangkok’s mass transit network to 515.2km by 2029, BTSC’s growth strategy over the next five years consists of securing new mass transit lines as well as other rail projects.
Along with its extension plans for new lines, the company has received the operation and maintenance contract for new green line extensions from Bearing to Samut Prakarn (12.6km) and Northern end from Mo Chit to Khu Khot (18.2km). Also, the company has secured new contracts for the pink line from Khae Rai to Min Buri (34.5km) and the yellow line from Lat Phrao to Samrong (30.4km) – increasing its total rail operations from 38.1km to 132km in the next 3-4 years, driving an expected growth in mass transit revenues in excess of 30 per cent per annum on average.
BTSC also aims to acquire an additional 82.9km worth of contracts for Bangkok’s gold, green west, orange, light rail transit and grey lines. These strategic investments will allow the subsidiary to contribute around two-thirds of BTSG’s total operating revenues in five years.
“Our keys to success have been the stability and strategic location of our business, and our concession agreement with the government allowing us to increase our fares in the Core Network as necessary,” Surapong says. “Our service quality is also key. For 18 years, people continue to talk about the quality, safety, cleanliness and punctuality of our operations.”
With the expansion of BTSC’s mass transit system network expected to incur an ever-increasing number of passengers, the BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF) was established as an alternative for investors seeking a regular and growing dividend.
Under its concession agreement with the BMA, BTSC is entitled to all revenues including fares and advertising revenue from the BTS SkyTrain’s dark green and light green lines of the 23.5km Core Network. BTSC sold its right to the future net farebox revenues under this agreement to BTSGIF in April 2013 – and holds one-third of the fund’s shares through BTS Group.
“The potential growth for BTSGIF also includes the upcoming lines we are planning over the next three to five years, which will increase ridership and revenues to the fund,” Surapong says. “It is also an opportunity open to international investors.”
“We’re a resilient business,” Surapong says. “With 24 years of experience, we aim to continue expanding and ensuring that our new businesses will be feasible investments with attractive returns for investors.”