Laura Acres, senior vice president of the firm's corporate finance group, says carriers in the region are shifting their focus away from capex and investment and towards returns to the shareholders.

"Capex is plateauing, revenue [growth] is slowing, and margins are declining," she told attendees at the TMT Finance & Investment Asia Conference in Hong Kong this week.

"People think of Asia as high growth, but growth is in line with GDP," she noted.

Asia/Pacific telecom markets are no longer low penetration, Acres continued. "It is reaching super-saturation in some markets. Many countries have far more than 100 percent penetration. India actually has more mobile phones than toilets!"

Operators can no longer rely on growth simply by getting phones into the hands of subscribers. Now their strategies are more focused on trying to build up postpaid subscriber numbers and/or developing value-added services (VAS). In Indonesia, where churn is commonly above 100 percent, carriers are looking to services such as mobile banking and transactions to retain customers.

But Acres said that although margins are down from "very high levels" in the recent past, they are still at levels that European operators "would kill for." She named four operators -- Philippine Long Distance Telephone Co. (PLDT), China Mobile Ltd., and Indonesian mobile operators PT Telekomunikasi Selular (Telkomsel) and PT Indosat Tbk -- that still enjoyed EBITDA (earnings before interest, tax, depreciation and amortization) margins above 50 percent.

At the other end of the market, competition and a consumer-friendly regulator in South Korea had helped drive EBITDA margin levels to well below 30 percent.

The changing environment is stretching some telcos, however.

Last August Moody's cut its rating on incumbent operator Singapore Telecommunications Ltd. (SingTel) to Aa2 from AA3 because of its plan to raise dividends despite relatively high debt. In addition, Malaysia's Axiata Group Berhad was downgraded to Baa2 because it had hiked returns while also boosting capex.

Despite this, telecom operators -- and not just in Asia/Pacific -- are still very much favored by capital markets. "There just aren't enough telco bonds," stated one bondholder at the conference.

Acres noted that Hong Kong Broadband Network Ltd. (HKBN) sought US$450 million from the bond markets in January and was over-subscribed 20 times. "This is for a company that really is not known very much," said Acres. "It actually went to the bond markets without a rating: no rating, not very well-known internationally and it still got $9 billion. On the whole this is an industry with utility-like cash flows. It is very resilient, especially in Asia."

Asia/Pacific telcos have enough cash and cash flows to self-fund during the next 12 months without raising any incremental debt, she added. "We see a sector that is highly bankable."

-- Robert Clark, contributing editor, special to Light Reading