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Mergers likely in telecom sector: report

Chunghwa Telecom Co (中華電信) and some of its Asian rivals are expected to see opportunities for mergers and acquisitions (M&A) soon in the Asia-Pacific region, Standard & Poor's (S&P) said last week.

Mergers and acquisitions will be hot in this region in the near term as long as economies of scale matter, S&P credit analyst Yasmin Wirjawan said in a report released on Friday.

"M&A is likely to involve telecom operators in India, Indonesia and [South] Korea. [A] few major operators, namely Singapore Telecommunications Ltd, TM International Bhd, SK Telecom Co, and Chunghwa Telecom Co will continue to seek opportunities outside their home market," she wrote.

The report, however, warned against growing risks facing regional telecom operators, despite their healthy financial profiles.

Telecom operators will continue to face policy challenges in fields such as open access and licenses, the Singapore-based analyst said.

"Regulatory conditions continue to be a key risk," Wirjawan said. "Incumbents across the region have retained their dominance in local vocal and network access services, which continue to be subject to rate regulation and procompetitive measures."

In the medium term, telecom operators could see their credit weaken moderately because of shareholder pressure on operating profitability and dividend payouts.
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