Fitch Ratings expects the growth and pricing of data services to be crucial in maintaining the credit quality of Asia-Pacific (APAC) telecoms in 2018
Median capex will rise by around 9% – funding investment in 3G, 4G, fibre broadband and spectrum. Countries with the most advanced networks – China, Korea, Malaysia and Singapore, for example – will actually see stable or slightly reduced capex in 2018.
Finch is forecasting credit metrics to be broadly the same as in 2017. FCF will to be worse than 2017 in many cases, although disciplined dividend policy will lead to only a moderate increase in debt. Median gross and net FFO adjusted debt will be largely unchanged at 2.5x and 2.1x, respectively (2017 forecast: 2.4x and 2.2x, respectively).
Among the other issues for investors to watch: first, in India – the most volatile telco market in APAC – where the pricing strategy of disruptor Reliance Jio will be crucial in determining incumbents’ credit strength.
Second, the acquisition of media and digital marketing assets will enhance operators’ brands and extend reach across the value chain, although this is likely in more developed markets initially.
Third, 5G standards may be agreed in 2018, giving telcos greater visibility to determine their strategy for the technology and the timetable for the investment required.