New entrants to spur telco competition in Asia Pacific

MANILA, Philippines — Global credit rating agency Moody’s Investors Service said the telecommunications sector in Asia Pacific (APAC) will face stronger competition and increasing commoditization in 2019 caused by new entrants in the industry.

“All APAC markets in which Moody’s-rated telecommunications companies operate will face strong competition in 2019, with new entrants spurring competitive intensity in Singapore, Japan and Australia,” Moody’s vice president and senior analyst Nidhi Dhruv said.

“And, while 4G will remain the dominant technology used by telecommunications companies in APAC, 5G will gain some traction in 2019-20,” Dhurv added.

Dhurv said Japan, Korea and Australia are expected to lead the region in rolling out 5G services in 2019.

This is among the findings of Moody’s recently-released report titled “Telecommunications – APAC: 2019 Outlook,” authored by Dhruv.

The report covers 11 markets in APAC: Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Philippines and  Singapore.

Moody’s said that while overall revenue growth for all 11 markets will prove slow, the slowing revenue growth situation is most pronounced in emerging markets, where revenue growth will fall to three to 3.5 percent though 2019 versus 3.9 percent in 2017.

“Comparing overall revenue growth across APAC with GDP growth, Moody’s says that companies as a whole will show modest revenue growth of two to 2.2 percent, with such growth lagging average GDP growth of about 4.6 percent for  the region,” the report said.

The credit rating agency also said that high shareholder returns and capital expenditure levels would continue to temper free cash flow generation.

“Consequently, companies will look to diversify revenues as traditional telecommunications revenues contract, leading to more cross-industry partnerships,” Moody’s said.

However, Moody’s said its outlook for the telecommunications sector in APAC for 2019 remains stable, with companies in the region likely to show relatively stable leverage and debt levels over the next 12-18 months.

It added that while  liquidity is weakening, such levels remain supported by the companies’ access to the banks and bond market.