MOODY'S: HIGHER DATA, BROADBAND CONSUMPTION IN ASIA PACIFIC TO DRIVE GROWTH THROUGH 2023, TELCO SECTOR TO CONSOLIDATE FURTHER

KUALA LUMPUR, Sept 7 (Bernama) -- Data and broadband consumption in the Asia-Pacific (APAC) will thrive, while further consolidation will temper competition over the next few years, propelling revenue at an annual rate of between 4.0 per cent and 4.5 per cent through 2023, according to Moody's Investors Service.

Moody’s said industry consolidation would continue and telcos would look to diversify their revenue streams, but rated companies are likely to retain credit metrics that are within their rating levels.

“Consolidation has taken place in markets such as Indonesia, India, Singapore, and Malaysia (A3 stable), as telcos look for synergies ahead of aggressive fifth generation (5G) spending.

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“Companies like Singapore Telecommunications Ltd (Singtel, A1 stable) and Axiata Group Bhd (Baa2 stable) have made bolt-on acquisitions and expanded into adjacent industries, such as data centers, cybersecurity, and investments in digital banks, to counter slowing growth in their core mobile business.

“We do not expect these acquisitions to weaken the credit profiles of both companies, given Singtel's asset recycling plans and partnerships, and Axiata's judicious mix of funding and intention to bring strategic partners into its tower business,” the rating agency said. 

Its senior vice-president Annalisa Di Chiara said capital expenditure (capex) intensity for telcos in APAC emerging markets such as China, India, Indonesia, Malaysia, and Philippines would be around 30 per cent to 33 per cent as 5G investment rises.

“The capex level would be lower, at 16 per cent to18 per cent, 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,” she added.

Going forward, the telco sector's liquidity would continue to be strong as the region's telcos would maintain their track record of sustained access to capital markets and bank financing even through economic cycles.

“Telcos are also selling non-core assets such as towers to maintain balance sheet strength as capex remains high,” the rating agency said.

-- BERNAMA