Asia-Pacific (APAC) telecommunication companies' (telcos) revenue will call in their highest revenue growth since 2016, excluding 2021's low base effect, according to Moody’s Investors Service latest report released September 7, 2022.
The report maps out the relative positioning of 20 rated APAC telcos but covers just one local telco, PLDT Inc.
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“APAC’s data and broadband consumption will thrive while further consolidation will temper competition over the next few years," says Moody’s Senior Vice President Annalisa di Chiara.
"These buoyant conditions will propel revenue at a pace of 4.0 percent to 4.5 percent through 2023,” she projected.
Increased data and broadband consumption as well as industry consolidation that tempers competition will support revenue growth.
Meanwhile, capital expenditure (capex) intensity for telcos in APAC emerging markets such as the Philippines, China, India, Indonesia and Malaysia will be around 30-33 percent as 5th generatiom technology (5G) investment rises.
The capex level would be lower, at 16-18 percent for telcos in the region’s developed markets of Australia, Hong Kong, Japan, Korea, Singapore and New Zealand, similar to the level over the past two years.
“Most APAC telcos can fund their capex with cash flows despite profitability pressure from ongoing stiff competition," according to Nidhi Dhruv, a Moody’s Vice President and Senior Analyst.
Despite potential investment or debt-funded expansion into businesses including digital services, data centers and digital banking, "Sector-wide average leverage will remain stable at 2.3x-2.5x, supported by EBITDA growth and relatively unchanged debt levels from 2021,” he added.
This compares with leverage of 2.4x for the 12 months through March 2022.
Moody's expect debt levels to remain relatively unchanged at about $195 billion over 2022-23.
At the same time, the telecom sector's liquidity will continue to be strong.
"We expect the region's telcos will maintain their track record of sustained access to capital markets and bank financing even through economic cycles," the report stated.
Telcos are also selling non-core assets such as towers to maintain balance sheet strength as capex remains high.
Moody's new report and data supplement compares the key financial metrics of the 20 rated APAC telcos, the regulatory environment in which they operate, as well as environmental, social and governance scores.
Their leverage levels are a key differentiator of credit quality. All but one are investment grade, and several benefit from parental support.
By contrast, only 40 percent and 28 percent of rated telcos in Europe, the Middle East and Africa (EMEA) and the Americas, respectively, are investment grade.