The ratings outlook for fixed-line operators in Asia over the next 12 months is stable, while that for mobile-phone companies is positive, Moodys said in a report today.
Growth will be the strongest for companies in markets including China, Indonesia, Malaysia and Thailand, where the mobile-phone penetration rate is low, Moodys said. Better cash flow means debt has been trimmed to sustainable levels and many Asian phone companies are able to fund business plans themselves, the rating company said.
The financial profiles of most operators in Asia Pacific continue to improve, principally through stronger generation of free cash that is mostly being applied to reducing debt, Moodys analysts Charles Macgregor, Brian Cahill and Clara Lau wrote in the report.
In mature markets such as Singapore, Australia, New Zealand and South Korea, Moodys expects a Baa or A rating for phone operators growth.
Moodys considers most market structures as relatively settled and there is little likelihood these ratings will change in the forthcoming 12 months, the analysts wrote.
Mergers and acquisitions may increase operating risks of Asian phone companies as they look for growth outside their home markets, Moodys said. Companies such as China Mobile Ltd., the worlds largest cell-phone operator by market value, South Koreas SK Telecom Co. and Singapore Telecommunications Ltd. are seeking overseas acquisitions to spur earnings.
Moodys would view with caution any opportunistic merger and acquisition activity that may occur, Macgregor, Cahill and Lau said. At the same time, the overall strength of the cash flows of possible buyers - SK Telecom, KT Telecom, SingTel, Telekom Malaysia and China Mobile - are sufficient to support their ongoing investments without materially affecting their credit profiles.