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"Organic revenue growth will be broadly in line with our forecast average GDP growth for the region, but lower than the 5.2% growth recorded in 2015, owing to increasing mobile penetration rates and ongoing competition," says Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer.
"Aggregate EBITDA will grow, albeit slightly, as it did in 2015, but the portfolio's average EBITDA margin will contract slightly amid intensifying competition, higher costs for providing data services and investments in margin-dilutive digital businesses," adds Di Chiara.
Revenue growth, EBITDA generation and margins, and capex intensity are the three factors driving the outlook for the region's telecommunications industry.
EBITDA margins, however, will on average contract slightly to around 39% by year-end 2017 from around 40% at year-end 2015.
Although capex will increase slightly in 2017 as operators continue to build out their 4G networks to handle larger volumes of data traffic, revenue growth will keep the capex-to-revenue ratio stable.
Average debt to EBITDA will also rise slightly in 2016 on incremental debt used for acquisitions, capex and shareholder returns, but will return to 2015 levels next year in 2017 as incremental EBITDA from acquired businesses will help offset the debt raised by these companies.
Liquidity remains a key credit strength for the sector, says Moody's, given the resilience of demand, which provides steady, recurring cash flows. The sector also has demonstrated strong access to the capital markets.
The rated portfolio's cash and projected cash flow from operations can cover all their cash demands, including capex, dividends and scheduled debt maturities, over the next 12 months.
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