In a new report, the rating agency notes that the cost of coping with the rise of smartphones and their surging data usage is weighing on the high margins of the region's telecom operators. However, Laura Acres, the report's lead author and a Moody's senior credit officer in Hong Kong, says, "Over the long term, tiered and post-paid pricing plans, coupled with reduced churn, will have a positive credit impact as traffic shifts from voice to data and video applications."
Acres also points to a push for more efficient capital investment and operating expenditure. She adds, "Unlimited data plans, surges in data demand, keen competition, and moves to 4G mobile telephony in advanced markets and to 3G in lagging ones are pushing operators to make more efficient use of capital and operating expenditure via tower and network sharing."
A second author, Ian Lewis, a senior credit officer for Moody's in Sydney, says, "To boost returns on capital, operators are investing in non-core businesses of information-technology and content services."
Lewis notes that operators' balance-sheet liquidity continues to be a core strength. He says, "A dearth of new credit issuance from telecom providers has kept demand high for telecom credit." Lewis explains that operators are a perennial favorite among investors because steady cash flows from some of the world's largest markets by subscribers and revenues have ensured stability throughout economic cycles in the region.
A third author, Tadashi Usui, a vice president for Moody's in Tokyo, cites the regional operators' healthy finances compared to global peers. He says, "Financial metrics of the region's telecom operators remain strong compared to those of peers in the U.S. and Europe although the decline in margins has been steeper in Asia Pacific, thus narrowing the gap."
In Asia Pacific, Moody's rates a total of 23 telecommunications companies in the following countries: Australia, Japan, Hong Kong, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, South Korea, and Thailand.
The report, entitled, "Asia-Pacific Telecoms: Stable Amid Imminent 3G, 4G Investments", is available at www.moodys.com. Moody's uses the analysis presented in its rating methodology for the global telecommunications industry, published in December 2010. Rating methodologies are also available at www.moodys.com under the credit-policy directory and rating-methodologies subdirectory.