Bangkok--May 12--Moody's Investors Service
Moody's Investors Service says that the rating outlook over the next 12 months for integrated and fixed-line telecommunications carriers in Asia Pacific (ex-Japan) remains stable, while that for cellular operators is positive.
In a new report, the ratings agency attributes the stability to most
players being major operators or having well funded business plans; the oligopolistic status of market structures; and ongoing robust growth in the cellular sector.
The report covers a wide range of issues, including the credit profiles
of the region's operators, regulatory developments, Moody's rating methodology, financial strengths and systemic risk.
The report is authored by Charles Macgregor, a Vice President / Senior
Credit Officer based in Moody's Sydney office. The markets covered include Australia, China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines and Thailand.
"Underpinning the overall upward ratings trend has been continued growth
in revenues and a desire among most carriers to enhance financial flexibility by applying a portion of free cash flow for debt reduction," Macgregor says, adding, "Moody's notes the ratings of non-investment grade carriers continue to be assisted by strong growth, while most investment grade non-cellular specific carriers face relatively flat growth prospects."
Looking at the challenges for operators in the next 12-18 months,
Macgregor sees three, specifically, the ability to adapt to an environment of rapid evolution, particularly as related to the various aspects of substitution and convergence; managing changes in competitive and regulatory environments; and maintaining and improving financial flexibility, particularly the generation of free cash flow.
The report notes that cellular operators - in contrast to fixed-line
operators - continue to meet a growing demand for mobile communications.
"Significantly, they find themselves in the happy position of being
purveyors of consumer products meeting the demands of increasingly affluent societies, albeit some are starting from low bases," Macgregor says. "This means, however, that many operators will continue to have high capex and need to maintain financial strength to fund this."
The report also says that most rated cellular operators in Asia Pacific
continue to grow on a significant scale and are emerging with sound free cash flows, enhancing their ability to service debt and fund growth internally.
Touching on systemic risk, the report says "Moody's believes the biggest
challenge affecting their ability to enhance ratings relates to country-specific risks."
In other words, operators in emerging countries remain exposed to varying degrees of risk from macroeconomic trends, political volatility and, to a
lesser extent, foreign exchange moves and regulatory changes, the report says. At the same time, the growth and maturing nature of the mobile operators has engendered a degree of certainty in the regulatory environment.
Moody's rates 19 carriers in Asia Pacific with rated debt outstanding of
USD32 billion.
Sydney
Charles F. Macgregor
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Pty Ltd
612 9270 8100
Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
612 9270 8100 End.