S&P: Emerging telecom markets including China to offer greater growth prospects

The emerging Asia-Pacific telecom markets, including China, India and Indonesia, will offer greater growth prospects, as their penetration rates remain relatively low, Standard & Poor's Rating Services said in a report published on Tuesday.

The report, titled "Industry Report Card: Mixed Signals for Asia-Pacific Telecommunications Companies," said the Asia-Pacific telecom industry has witnessed major consolidation over the past few years.

The report said some operators are also seeking opportunities for expansion in the region, given the significant cash balances and increasing need to diversify earnings. Such operators include Singapore Telecommunication Ltd., Telecom Malaysia Berhad and SK Telecom Co. Ltd.

However, the report said telecommunications operators in the Asia Pacific will face increasing risks as their business profiles change, although the overall outlook for the industry is stable.

"Deregulation, pressures on profitability from the change in the revenue mix to lower margin new services, higher capital- spending requirements, and declining market share are some challenges that Asia-Pacific telecom operators will face in the near to medium term, said Standard & Poor's credit analyst Yasmin Wirjawan.

Wirjawan said "given their need to deliver shareholder value, these operators' ability to balance these risks and maintain their strong financial flexibility will be key to their future credit quality."

Nevertheless, most telecom operators in the region have maintained stable credit quality in the past six months, benefiting from years solid performance backed by high entry barriers, dominant market shares, and conservative financial profiles.

These operators also exhibit strong business profiles and improved financial risk profiles, placing them in a better position to weather any volatility, according to the report.

In line with global trends, Asia-Pacific telecom providers have to deal with declining growing in fixed-line services. Growth in this segment has stagnated due to substitution by wireless services and rationalization by increased broadband penetration.

Slowing wireless subscriber growth in the saturated developed markets is likely to lead to more intense pricing competition in countries such as Japan, Singapore and Australia.

Source: Xinhua