& cplSiteName &

Moody's Warns on Asia Telco Debt

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

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        ADD A COMMENT
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 Sabre
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!!
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Download our complete guide to de-risking NFV deployment in 2016, including:
  • An eight-step strategy to deploying NFV safely, based on input from the companies that have already started virtualizing their production networks.
  • Interviews with leading executives at Colt, AT&T, Deutsche Telekom, Cisco, Nokia, ZTE, Ericsson and Heavy Reading.
  • Flash Poll
    Live Streaming Video
    Prepping for the Future: Upskill U Explained
    During this short kick-off video, Doug Webster, Vice President of Service Provider Marketing, Cisco, and Light Reading’s CEO & Founder Steve Saunders give an overview of Upskill U.
    LRTV Interviews
    Ditching the Slash & the Orchestration Wars

    5|3|16   |     |   (2) comments


    SDN and NFV have been inextricably bound with each other for so long that on a conceptual level, smooshing them together into one catch-all phrase – SDNFV – is now justifiable, according to Dan Pitt, executive director of the Open Networking Foundation (ONF). Light Reading spoke to Pitt at the NFV World Congress, where he explained that the next ...
    LRTV Custom TV
    ZTE TV Connect Highlights

    5|3|16   |     |   (0) comments


    ZTE gives us a tour of its booth and new products at TV Connect in London.
    LRTV Custom TV
    Deluxe's Unified Delivery Solution

    5|3|16   |     |   (0) comments


    Join Alan Breznick of Light Reading and visit the Deluxe booth at NAB! Here you'll find Deluxe's Unified Delivery Solution, OTT video, virtual reality, HDR, 4K and much more!
    LRTV Interviews
    Verizon Puts Gray Boxes in the Shade

    5|2|16   |   04:33   |   (1) comment


    When it comes to the white box trend, "gray" boxes, which have a slight proprietary twist, don't give service providers and end users the advantages they're seeking, according to Verizon's Vice President of Product and New Business Innovation Shawn Hakl.
    LRTV Custom TV
    Dealing With a Disrupted Video Market

    5|2|16   |     |   (0) comments


    Ericsson's Simon Frost discusses how traditional pay-TV providers can cope with the big changes wrought by the rise of OTT video and IP technology.
    LRTV Custom TV
    The VNF Responsibility of Red Hat

    5|2|16   |     |   (0) comments


    At MWC, Caroline Chappell of Heavy Reading visits the Red Hat booth and sits down with Chris Wright to talk about the responsibility the VNF needs to take on in order to ensure the operators get the carrier-grade performance they expect for their network.
    LRTV Interviews
    AT&T Expert on the Key Pillars of UC

    4|29|16   |   03:58   |   (0) comments


    Vishy Gopalakrishnan, AVP of product marketing at AT&T, talks about the three developments that are making unified communications and collaboration secure and reliable for enterprise users.
    LRTV Documentaries
    LRTV Report: Mobile Core Innovation

    4|28|16   |   25:32   |   (0) comments


    Hear from multiple industry experts from Deutsche Telekom, SK Telecom, Heavy Reading, Huawei, Cisco, Ericsson, Nokia, NEC and many more about developments in the mobile core as operators virtualize their IMS and evolved packet core systems and prepare for a 5G world.
    LRTV Huawei Video Resource Center
    NFV World Congress Highlight

    4|26|16   |     |   (0) comments


    The highlight of the NFV World Congress contains exciting telecom news. Join us for an inside look at Huawei's ICT 2020 plan and its latest collaboration with industry leaders.
    LRTV Interviews
    Unified Comms Finds Its Voice

    4|25|16   |   03:44   |   (0) comments


    Peter Quinlan, VP of UCC Product Management at Tata Communications, talks about the evolution of the unified communications and collaboration services sector and how voice is now a big part of current developments.
    LRTV Documentaries
    So... What Do We Do Now?

    4|25|16   |   03:24   |   (0) comments


    After a long hiatus, Max Dingman, the CEO of a GeeGhiz, returns for a motivational board room pep talk.
    LRTV Documentaries
    NAB 2016 Highlights

    4|21|16   |     |   (0) comments


    Light Reading's Cable/Video Practice Leader Alan Breznick climbs down from the slots to tell us about the latest news in broadcast technology at NAB 2016 in Las Vegas.
    Upcoming Live Events
    May 23, 2016, Austin, TX
    May 23, 2016, Austin Convention Center
    May 24-25, 2016, Austin Convention Center, Austin, TX
    September 13-14, 2016, The Curtis Hotel, Denver, CO
    December 6-8, 2016,
    June 16-18, 2017, Austin Convention Center, Austin, TX
    All Upcoming Live Events
    Infographics
    A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
    Hot Topics
    Ultra-Broadband Summit, Hong Kong
    Iain Morris, News Editor, 4/27/2016
    Amazon AWS Reports $2.6B Quarterly Revenue, Up a Colossal 64%
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/28/2016
    WiCipedia: Woman Cards & Bitch Switches
    Sarah Thomas, Director, Women in Comms, 4/29/2016
    Sprint CEO: Our Spectrum Is for 5G
    Dan Jones, Mobile Editor, 5/3/2016
    Amazon & Other 'Big 4' Cloud Providers Crushing Competitors
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/29/2016
    Like Us on Facebook
    Twitter Feed
    BETWEEN THE CEOs - Executive Interviews
    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    Animals with Phones
    Sloth Mail Click Here
    Sloth mail -- somehow even slower than snail mail.
    Live Digital Audio

    Of all the tech companies in the Valley, Intel has made the most aggressive commitment to building a diverse and inclusive workplace culture. It's doing so by taking concrete, measurable steps, making a large financial investment and through a commitment to complete transparency about its progress. In this radio show, WiC Director Sarah Thomas will be joined by Shlomit Weiss, Intel's Vice President, Data Center Group, and General Manager of Networking Engineering, who will share with us why Intel is tackling this huge challenge, how and to what effect. She will also discuss her unique experiences leading development of Client SOC development in the past and today leading development of all of the chipmaker's silicon hardware for networking IPs and discrete devices and managing a team of 600 engineers across Israel, Europe and the US.