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India’s telecom industry is the only market in Asia where industry-wide revenue is declining due to unprecedented price competition spurred by a new entrant, Reliance Jio, Moody’s Investors Service said in its latest report. In the other emerging countries, the revenue growth of about 3.5% in 2018 is expected, which is lower than forecast GDP growth of approximately 5.8%.
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The Indian telecom industry currently has a Baa3 positive rating from Moody’s.
Moody’s said that revenue growth in the developed markets in the region would remain in line with expected GDP growth of around 1.5%.
The agency said that the outlook for the telecommunications industry in Asia Pacific is stable, but will also face headwinds from technological changes.
“Three factors drive the stable outlook; expectations of year-on-year average revenue growth of about 2.0%-2.5% over the next 12-18 months; EBITDA growth of 0%-2%, although average margins will contract slightly next year; and CapEx — as a percentage of revenue — remaining elevated at around 25%,” Nidhi Dhruv, Moody’s Vice President and Senior Analyst, said in a statement.
“However, organic revenue growth is slowing, although the pace varies by country, due to increasing mobile penetration rates, ongoing competition, and technological headwinds,” Annalisa Di Chiara, Moody’s Vice President-Senior Credit Officer, said in a statement.
Overall for the region, the average EBITDA margin for Moody’s-rated telecommunications companies in Asia Pacific will contract to around 39%-40% over the next 12-18 months, reflecting intensifying competition, higher costs for providing data services, and investments in margin-dilutive digital businesses.
Meanwhile, capex to revenue will fall to around 25% in 2018 from 27% in 2016, although remaining elevated for most operators as they continue to build out their 4G networks to handle larger volumes of data traffic. In this context, we do not expect meaningful CapEx towards 5G over the outlook period.
