Moody's Investors Service says its outlook for the telecommunications industry in Asia Pacific over the next 12-18 months is stable, reflecting the sector's revenue growth from data services, steady EDITDA levels and strong liquidity profile.
"The average revenue of Moody's-rated telecommunications companies in Asia Pacific will increase by 3%-4% year-on-year over the next 12-18 months, similar to the 3.8% growth seen in 2014, and trending in line with Moody's forecast average GDP growth for the region," says Nidhi Dhruv, a Moody's Assistant Vice President and Analyst.
"As for aggregate adjusted EBITDA, the result will remain stable in 2016 as against levels seen in 2014, but average EBITDA margins will decline marginally," adds Dhruv. "Leverage will remain at current levels, because of higher capital spending on 3G/4G network improvements, but liquidity will remain strong."
Moody's report says that over the next 12-18 months, revenue growth rates will register 1%-2% in developed markets such as Singapore, Australia, Japan and Korea. By contrast, emerging markets such as China, India, Thailand and Indonesia will see growth rates of 5%-6%.
The slower growth in developed economies reflects the maturity and high tele-density of these markets, while the higher growth in emerging markets will be driven by increasing smartphone penetration and data consumption. Overall, the companies' revenue growth will remain broadly in line with their home countries' GDP growth rates, given the domestic focus of their businesses.
On EBITDA, Moody's says year-on-year aggregate adjusted EBITDA growth should register about 0%-3% over the next 12-18 months, driven by revenue growth.
But EBITDA margins for the 22 telecommunications companies that Moody's rates across 13 jurisdictions will likely contract slightly to 38.7% by end-2016 from 39.1% at end-2014, owing to rising mobile-phone penetration, ongoing competition, and higher costs associated with a key contributor to revenue growth: data services.
Debt-to-EBITDA will remain relatively constant at about 2.4x, because incremental EBITDA will be offset by additional debt raised by companies to fund capex, as well as shareholder returns in the form of dividends or share buybacks.
Nonetheless, liquidity will remain strong, on the companies' steady and recurring cash flows, and the resilience of demand for telecommunications services even in a downturn. Moody's points out that in general, the companies have demonstrated strong access to both bank and bond market funding, and show manageable levels of foreign currency exposure.
Moody's has maintained a stable outlook on the telecommunications industry in Asia Pacific since May 2005.
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