Fiercer competition and rising capex needs will put pressure on the credit profiles of most Asian telcos over the next year, says Fitch Ratings. “We have a negative outlook on the telecom sectors in India, Singapore, Malaysia, Thailand and the Philippines. Korea, Indonesia, China and Sri Lanka are all on stable outlook,” Fitch said. According to the rating agency, competition is likely to intensify in India, Singapore and Malaysia, with new entrants poised to offer cheaper tariffs to poach customers from incumbents.
Rising competition will add to pressure on revenue, which Fitch expects to grow by just 0-5 percent in most Asian telco markets in 2017. Data usage is expected to continue to rise strongly, but most telcos are pricing data in such a way that increased usage is not translating into similar revenue growth. “The trend of falling data tariffs and the substitution of data for voice and text will continue in most markets. Fixed-line and international long-distance services are in a structural decline. China is the only market where we expect higher data usage to translate into growth in average revenue per mobile user,” Fitch noted. Meanwhile, Fitch expects industry consolidation in India, Indonesia and Sri Lanka, as weaker telcos exit the market or seek M&A to strengthen their competitive position. “The Sri Lankan market looks particularly crowded and ripe for consolidation. Debtfunded M&A could threaten the ratings of acquirers in these markets,” the rating agency noted.