Moody’s: New telco to weigh down revenue growth of existing players

MANILA, Philippines — Credit rating agency Moody’s Investor Service expects moderate revenue growth and relatively steady EBITDA margins next year for Asia-Pacific telecommunication companies, including Philippine telco giant PLDT Inc.

Moody’s said the essential nature of Asia-Pacific telecommunication services have limited the sector’s exposure to pandemic-related disruptions, underpinning a stable outlook for the sector.

“We expect revenue growth of 3.5 percent to four percent in 2021 as the sector gradually recovers from a coronavirus-led decline in the first half of 2020. This revenue growth lags behind average GDP growth of five percent for the 11 Asia-Pacific countries with rated telcos in 2021, given the maturity of the sector,” Moody’s vice president and senior analyst Nidhi Dhruv said.

Moody’s expects telco operators in emerging markets to see revenue grow faster than in developed markets, due to relatively lower penetration rates.

Given revenue increases, it said aggregate adjusted EBITDA would grow two percent to three percent in 2021 after just 0.1 percent growth this year.

EBITDA margins are seen to remain stable at around 37 percent as telcos cut costs and delay capex in a more difficult economic environment.

“Although operators’ capex will decline marginally, it will remain high at about 22 percent of revenue on average in 2021, well above the US and European telcos’ ratios. But most companies should be able to fund their spending largely with internal cash,” Dhruv said.

PLDT Inc., Baa2 stable, is likely to borrow to fund intensive capital spending, according to Moody’s. The company lengthened its debt maturity profile with the issuance of US dollar bonds in the first half.

For the Philippines, the credit rating agency said rising data consumption and broadband usage continue to drive revenue growth, although partially offset by declines in legacy voice and messaging services.