& cplSiteName &

Moody's Warns on Asia Telco Debt

Robert Clark
News Analysis
Robert Clark

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
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.
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.
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.
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!!
Featured Video
From The Founder
Light Reading founder Steve Saunders recently visited the University of North Carolina Charlotte (UNCC) where Cisco's Tetration application is providing data center analytics, simplifying SDN, helping with cloud migration and overseeing white-list security policy.
Flash Poll
Upcoming Live Events
March 20-22, 2018, Denver Marriott Tech Center
March 22, 2018, Denver, Colorado | Denver Marriott Tech Center
March 28, 2018, Kansas City Convention Center
April 4, 2018, The Westin Dallas Downtown, Dallas
April 9, 2018, Las Vegas Convention Center
May 14-16, 2018, Austin Convention Center
May 14, 2018, Brazos Hall, Austin, Texas
September 24-26, 2018, Westin Westminster, Denver
October 9, 2018, The Westin Times Square, New York
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 7-8, 2018, London, United Kingdom
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
AT&T Likens DoJ Suit to Shaved Persian Cat
Mari Silbey, Senior Editor, Cable/Video, 3/12/2018
Trump Blocks Broadcom's Qualcomm Acquisition
Dan Jones, Mobile Editor, 3/12/2018
John Deere Bets the Farm on AI, IoT
Scott Ferguson, Editor, Enterprise Cloud, 3/12/2018
Eurobites: BT Hires Sherman as Strategy Tank
Paul Rainford, Assistant Editor, Europe, 3/14/2018
Animals with Phones
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed