Light Reading

Moody's Warns on Asia Telco Debt

Robert Clark
News Analysis
Robert Clark
1/16/2014
50%
50%
Repost This

Asian telcos are carrying high levels of debt, including foreign currency loans, and could be exposed if the economy suffers a downturn, a Moody's rating executive has warned.

Laura Acres, senior vice president of Moody's Investors Service , says the industry is largely self-financing with a stable outlook, but that the high leveraging could be a concern in the future.

She says the ratio of free cashflow to debt has declined, while shareholder returns have increased, indicating that operators are "clearly focused on using free cash flow to pay shareholders rather than pay down debt."

Speaking at the TMT Finance & Investment conference in Hong Kong, she said that with "leverage embedded at high levels, people might start to think about M&A activity."

This wouldn't be a bad thing as long as the core business is functioning and operators are not borrowing to pay dividends. But there has been a lot of depreciation of Asian currencies during the past 12 months, and foreign currency as a proportion of debt runs as high as 80% among Asian operators, she noted.

Telcos might get accustomed to paying high dividends, Acres cautioned. "The big danger is they overpay and they get hit by a downturn... We believe it's manageable. Most operators have protections in place. We do see the risk as currently manageable, but we do see a note of caution," she stated.

Acres noted that, compared with Europe, the industry was in a strong position. Most Asian carriers are in an up-cycle, with the prospect of further growth to come. By contrast, virtually all European operators are in a down-cycle, according to a Moody's analysis.

She added that the industry is relatively self-financing, capable of meeting all its cash, maturing debt, and dividend commitments this year.

Acres noted that China Mobile Ltd. has the fourth-strongest balance sheet in the world, with US$70 billion in cash, while operators such as PT Telekomunikasi Selular (Telkomsel) , PT Indosat Tbk , and PT XL Axiata Tbk in Indonesia still enjoyed margins above 50%, some of the highest to be found anywhere.

— Robert Clark, contributing editor, special to Light Reading

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
macster
50%
50%
macster,
User Rank: Light Bulb
1/16/2014 | 12:00:09 PM
Re: I hope the CFOs know what they are doing....
Indonesia is hot indeed. Myanmar too.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
1/16/2014 | 11:01:31 AM
fairly hollow warning
If this is an alarm bell, it sounds more like a fire drill than an actual emergency.
Phil_Britt
50%
50%
Phil_Britt,
User Rank: Light Beer
1/16/2014 | 7:33:02 AM
Re: I hope the CFOs know what they are doing....
Not just a lesson over the last 6-7 years. Remember when in late 1990s, a dot.com was all but a license to print money in terms of stock valuations -- until the "dotbomb" implosion?

 

Companies like Alcatel Lucent, Nokia, et al have never been the same since.
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
1/16/2014 | 6:20:30 AM
I hope the CFOs know what they are doing....
If there is any lesson to be learned from the past 6 or 7 years, it's that the good times don't last, so be prepared. It sounds like some of APAC's telcos are living it up and haven't thought too much about what might happen when things turn down (which they always do eventually, right?)

 

Indonesia sounds like a hot market!!
Flash Poll
LRTV Documentaries
Cable Eyes Big Technology Shifts

4|16|14   |   03:02   |   (4) comments


US cable engineers are facing a lot of heavy lifting in the coming years, notes Light Reading Cable/Video Practice Leader Alan Breznick.
LRTV Custom TV
Maximizing Customer Experience & Assuring Service Delivery in an IP World

4|15|14   |   4:57   |   (0) comments


Steven Shalita, VP of Marketing, NetScout Systems, Inc., discusses the challenges cable/MSO operators face in assuring the delivery of new IP-based services. Key points include the value of proactively managing performance, and using rich analytics and operational intelligence to better understand service and usage trends, make smarter business decisions and ...
LRTV Documentaries
Bye-Bye DVD: Consumers Embrace Digital Video

4|10|14   |   04:17   |   (7) comments


Veteran video analyst Colin Dixon, founder and principal analyst of nScreenMedia, says research shows 56% are using digital video already.
LRTV Documentaries
Video: TW Cable Puts Multicast Gateways to the Test

4|8|14   |   04:13   |   (1) comment


Tom Gonder, a chief architect at Time Warner Cable, explains how its trial of multicast gateways is impacting IP-based video plans.
LRTV Custom TV
Managing & Monetizing Big Data in Operator Environments

4|7|14   |     |   (1) comment


At Mobile World Congress, Gigamon's Director of Service Provider Solutions, Andy Huckridge, and Heavy Reading Analyst Sarah Wallace discuss the 'big data' issues facing carriers and operators today.
LRTV Huawei Video Resource Center
Data Center Energy – Build Your Data Center in a Modular Way

4|7|14   |   2:13   |   (0) comments


Dr. Fang Liangzhou, VP Network Energy Product Line, shared his thoughts about the challenges for data centers during CeBIT 2014.
LRTV Huawei Video Resource Center
Agile Network Solution – An Overview of Huawei's Agile Network Solution

4|7|14   |   2:31   |   (0) comments


Ajay Gupta, Director of Product Marketing, Networking Product Line, gives an overview of the Agile Network Solutions during CeBIT 2014.
LRTV Huawei Video Resource Center
Huawei’s eLTE Voice Trunking, Video and Data Applied for Railways

4|7|14   |   1:38   |   (0) comments


Gottfried Winter is the Sales Director at Funkwerk, a German specialist in GSM-r terminals and a long-time partner of Huawei. At CeBIT 2014, Winter talks to Light Reading about this partnership and the integration of enhanced voice trunking, video and data functions.
LRTV Huawei Video Resource Center
LeaseWeb Speaks Highly of Huawei's Datacenter Products

4|7|14   |   1:37   |   (0) comments


Rene Olde Olthof, Operations Director LeaseWeb, talks about the next data center transformation during CeBIT 2014.
LRTV Documentaries
Comcast: Reshaping the Cable Network Architecture

4|3|14   |   07:11   |   (8) comments


Shamim Akhtar, Comcast's architect and senior director of network strategy, explains why the cable company is moving to a more distributed network architecture.
LRTV Custom TV
VMware CEO Pat Gelsinger at Mobile World Congress

4|1|14   |   3:41   |   (0) comments


VMware CEO Pat Gelsinger speaks to Heavy Reading about the value of virtualization spanning from the data center to service provider networks to mobile devices.
LRTV Huawei Video Resource Center
Analysts' Impressions of Huawei SoftCOM at ONS 2014

4|1|14   |   1:11   |   (0) comments


After visiting the Huawei booth at ONS, Lee Doyle of Doyle Research gives his appraisal of Huawei's SoftCOM solution.
Hot Topics
BlackBerry Invests in Healthcare IT Startup
Sarah Reedy, Senior Editor, 4/15/2014
Volvo: AT&T HSPA+ Can Drive My Car
Sarah Reedy, Senior Editor, 4/16/2014
T-Mobile Petitions Operators to Kill Overages
Sarah Reedy, Senior Editor, 4/14/2014
Cisco & VMware Are Apple & Google of SDN
Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/14/2014
Mobile Apps Susceptible to Heartbleed, Too
Sarah Reedy, Senior Editor, 4/14/2014
Like Us on Facebook
Twitter Feed