Bangkok--22 Dec--Moody's
Moody's Investors Service has a stable outlook for the telecom sector in Asia Pacific (ex Japan), but sees some negative pressures building over the next 12-18 months.
In a new report, the rating agency notes that the stable outlook is based on various factors, ranging from strong fundamentals to good liquidity, and which for now counterbalance the negative factors.
"Continued expansion of both subscriber numbers and minutes of use should offset slowing growth in average revenues per user (ARPU), particularly in developing Asian economies," says Laura Acres, the report's lead author and a Moody's vice president in Hong Kong.
"Meanwhile, in the region's industrialized countries, telecom usage has the attributes of a quasi-utility that can, to some extent, mitigate increasing weakness in the overall economy," says Acres.
"Another important support for the stable outlook is -- as indicated -- the fact that balance-sheet liquidity remains good for most issuers because telecoms is one of the more bankable sectors, generating good cash flows and with favored access to domestic bond markets and banks,"
says Acres.
At the same time, the new Moody's report says that slower economic growth is the reason why Moody's is concerned negative pressure on the sector may rise in 2009. In particular, cutbacks in expenditure by businesses and consumers may impact telco revenues, especially in more consumer discretionary areas, such as broadband uptake and data usage in mobile.
Moreover, in the region's emerging economies specifically, there are high concentrations of low-income users who now face other demands for their spending, while in its industrialized countries, high penetration rates mean less room for subscriber growth.
In addition, the strength of competition in countries such as Indonesia, Pakistan and the Philippines still weighs on margins, although they remain strong by global standards.
Moody's rates a total of 23 telecommunications companies in Asia Pacific and they are in Australia, Hong Kong, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, South Korea and Thailand.
The report's other authors include Ian Lewis, a vice president in Sydney, and Ivan Palacios, an assistant vice president in Singapore. The report, entitled, "Asia Pacific (ex Japan) Telecommunications Sector: Stable for Now, but Negative Pressure Building", is available at www.moodys.com.