Asia-Pacific telecommunications operators face increasing risks in the near to medium term amid declining market share, higher capital spending and falling revenue from fixed-line services, Standard & Poor's said yesterday.
However, the overall outlook for the industry is stable, with years of strong performances seen helping these companies weather the impact of emerging challenges, the US credit risk evaluator said.
Industry mergers and acquisitions are expected to remain robust as cash-rich companies seek growth beyond their domestic markets, S&P added in its latest report on the region's telecom sector.
"Deregulation, pressures on profitability ... 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 S&P credit analyst Yasmin Wirjawan.
"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," Wirjawan said.
Wirjawan however said that most regional telecom firms have maintained stable credit quality, exhibiting " strong business profiles and improved financial risk profiles, placing them in a better position to weather any volatility," she said.
As with other global firms, Asia-Pacific telecom providers have to deal with declining revenues from traditional fixed-line services as wireless and broadband technology increasingly become popular.
S&P said it expects telecom firms to invest more in these next-generation networks to replace public switched telephone systems.
Intense competition for wireless services in technology savvy markets such as Japan, Singapore and Australia should lead to lower prices, with less saturated markets such as India, China and Indonesia offering better growth prospects.
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