Light Reading
A downturn could leave a lot of operators in Asia-Pacific in trouble, warns ratings agency.

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
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
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Huawei Video Resource Center
Dr. Dong Sun Talks About Carriers' Digital Transformation & Huawei’s Telco OS

1|29|15   |   6:28   |   (0) comments


Dr. Dong Sun, Chief Architect of Digital Transformation Solutions at Huawei, discusses how telecom operators can become digital ecosystem enablers and deliver optimal user experiences that are in real-time, on-demand, all-online, DIY and social (ROADS).
LRTV Huawei Video Resource Center
Huawei's Chief Network Architect Talks about Network Experience & Operators’ Strategies

1|29|15   |   3:39   |   (0) comments


In the digital age, network experience has become the primary productivity especially for telecom operators. In this video, Wenshuan Dang, Huawei’s Chief Network Architect, discusses how carriers can tackle the challenge of infrastructure complexity in order to enhance business agility and improve user experience.
LRTV Documentaries
The Rise of Virtual CPE

1|27|15   |   01:38   |   (4) comments


As NFV strategies evolve from tests and trials to production telco networks, expect to hear a lot about virtual CPE (customer premises equipment) rollouts during 2015.
LRTV Documentaries
Optical Is Hot in 2015

1|23|15   |   01:56   |   (2) comments


Optical comms technology underpins the whole communications sector and there are some really hot trends set for 2015.
LRTV Custom TV
Policy Control in the Fast Lane

1|22|15   |   2:57   |   (0) comments


What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for
LRTV Documentaries
Highlights From the 2020 Vision Executive Summit

1|21|15   |   4:33   |   (2) comments


In December 2014, Light Reading brought together telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Cisco's Doug Webster shared his company's ...
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Harmonic, Helping Carriers Accelerate 4K Video Deployment with Huawei

1|20|15   |   5:42   |   (1) comment


At IBC, Peter Alexander, Senior Vice President & CMO at Harmonic, speaks about the growing interest in pay-TV service and its branching into multiple devices.
LRTV Huawei Video Resource Center
Sony Marketing Director Olivier Bovis Discusses the Outlook for 4K and Cooperation With Huawei at IBC 2014

1|20|15   |   6:50   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Huawei Pay-TV Partner Envivio, Helping Carriers Accelerate 4K Video Deployment

1|20|15   |   2:57   |   (0) comments


At IBC, Olivier Bovis, Marketing Director of Sony, speaks about the coming of the 4K era.
LRTV Huawei Video Resource Center
Pay-TV's Networked Future

1|20|15   |   6:29   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about the future of the pay-TV industry and its transition.
LRTV Huawei Video Resource Center
Jeff Heynen: Distributed Access Will Help MSOs Compete in the Future

1|20|15   |   2:26   |   (0) comments


At IBC, Jeff Heynen, Principal Analyst at Infonetics, speaks about moving to distributed access and the future trend of cable business.
LRTV Interviews
Cisco Talks Transformation

1|20|15   |   13:02   |   (0) comments


In December 2014, Steve Saunders sat down with Cisco VP of Products & Solutions Marketing Doug Webster at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Cisco's approach to network virtualization as well as how service providers can begin to monetize high-capacity networks through the end of the decade.
Upcoming Live Events
February 5, 2015, Washington, DC
February 19, 2015, The Fairmont San Jose, San Jose, CA
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
September 9-10, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
December 1, 2015, The Westin Times Square, New York City
December 2-3, 2015, The Westin Times Square, New York City
Infographics
Hot Topics
Google Continues Gigabit Expansion
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/27/2015
Cablevision's New WiFi Try – Freewheeling Enough?
Mari Silbey, Independent Technology Editor, 1/26/2015
Overture Builds on NFV Foundation
Mitch Wagner, West Coast Bureau Chief, Light Reading, 1/27/2015
LightSpeed Looks to Plug the Gigabit Gap
Jason Meyers, Senior Editor, Gigabit Cities/IoT, 1/23/2015
Parks Predicts HBO OTT Success
Mari Silbey, Independent Technology Editor, 1/23/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Weekly Executive Interview
Join us live for Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, Universal, Intel and Microsoft, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he has to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.