Moody's maintains stable outlook for AP telco sector

KUALA LUMPUR: Moody's Investors Service has maintained its stable outlook for the telecom sector in Asia Pacific amid imminent investments in third- and fourth-generation (3G, 4G) TECHNOLOGY [].

In a report entitled "Asia-Pacific Telecoms: Stable Amid Imminent 3G, 4G Investments" released on Monday, Sept 19, the rating agency said that the cost of coping with the rise of smartphones and their surging data usage is weighing on the high margins of the region's telecom operators.

However, Laura Acres, the report’s lead author and a Moody’s senior credit officer in Hong Kong said that over the long term, tiered and post-paid pricing plans, coupled with reduced churn, would have a positive credit impact as traffic shifts from voice to data and video applications.

"Unlimited data plans, surges in data demand, keen competition, and moves to 4G mobile telephony in advanced markets and to 3G in lagging ones are pushing operators to make more efficient use of capital and operating expenditure via tower and network sharing,” she said.

A second author, Ian Lewis, a senior credit officer for Moody's in Sydney said that to boost returns on capital, operators were investing in non-core businesses of information-technology and content services.

He said operators' balance-sheet liquidity continued to be a core strength, adding that a dearth of new credit issuance from telecom providers had kept demand high for telecom credit."

“Operators are a perennial favorite among investors because steady cash flows from some of the world's largest markets by subscribers and revenues have ensured stability throughout economic cycles in the region,” he said.

Meanwhile, a third author, Tadashi Usui, a vice president for Moody's in Tokyo, cited the regional operators' healthy finances compared to global peers.

"Financial metrics of the region's telecom operators remain strong compared to those of peers in the US and Europe although the decline in margins has been steeper in Asia Pacific, thus narrowing the gap,” he said.

Moody's said it rates a total of 23 telecommunications companies in Australia, Japan, Hong Kong, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, South Korea, and Thailand.