Bangkok--29 Aug--Moody's Investor Service
Moody's Investor Service says the ratings outlook for integrated and fixed-line telecommunications carriers in Asia Pacific over the next 12 months is stable, while that for cellular carriers is positive.
"Most operators continue to operate in stable/growing environments and where real competition is limited. Many are also self-funding business plans and exhibiting enhanced cash flows whilst debt has been reduced to sustainable levels," Moody's says in a new report.
The just-released report -- Moody's annual outlook for the telecommunications industry in Asia Pacific (ex Japan) -- was authored by Charles Macgregor, a VP and Senior Credit Officer in Moody's Sydney office.
Over the last 12 months, 1 first-time rating has been assigned, while those of 12 carriers were upgraded, including 2 instances where the rating was upgraded twice. The adoption of joint default analysis for government-related entities has partly driven this upward movement, leading to upgrades for four carriers.
The detailed report discusses key rating factors for 2006-2007, such as event risk and the possibility of M&A activity prompting rating volatility. It also looks at key outlook drivers in accordance with Moody's rating methodology for telecoms companies.
"For the industry as a whole, the largest unknown in the coming 12 months will be the scale and frequency of event-driven rating actions, although the actual level of event risk to date has been moderate," Macgregor says, adding, "However, many carriers face maturing revenue profiles and prospective pressure on their abilities to increase net income while, at the same time, cash flow generation stays strong and debt profiles conservative."
Besides event risk, the key challenges are substitution risk for ex-incumbents and funding network expansion for emerging cellular operators. And while Moody's has before highlighted concerns that operators in emerging countries were exposed to varying risk from macroeconomic trends and political volatility, experience has shown that most are resilient to such issues.
The key risk in emerging markets is more downgrades in the sovereign ratings, and which represent systemic risk and are outside the control of the affected companies. Copies of the report can be accessed at www.moodys.com
Sydney
Brian Cahill
Managing Director
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Sydney
Charles F. Macgregor
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100