Reliance Jio impact: Moody’s says telcos to see revenue dip, rest of Asia to grow

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New Delhi | Updated: November 2, 2017 12:00:14 AM

India will be the only country where telecom sector's revenue will continue to decline for sometime whereas rest of the markets in Asia will witness growth, Moody's Investors Service said today.

India will be the only country where telecom sector’s revenue will continue to decline for sometime whereas rest of the markets in Asia will witness growth, Moody’s Investors Service said today. (Image: Reuters)

India will be the only country where telecom sector’s revenue will continue to decline for sometime whereas rest of the markets in Asia will witness growth, Moody’s Investors Service said today. “India (Baa3 positive) will be the only country in Asia where industry-wide revenue is declining due to unprecedented price competition spurred by a new entrant. In the other emerging countries, we expect revenue growth of about 3.5 per cent in 2018, lower than forecast GDP growth of about 5.8 per cent,” Moody’s said in its outlook for Asia Pacific’s telecom industry. Indonesian operators Telekomunikasi Selular and Indosat Tbk (PT) will lead the sector with revenue growth of 6.5-7 per cent in 2018, reflecting modest competition and growing smartphone penetration, the report said. The rating firm said that revenue growth in the developed markets in the region will remain in line with expected GDP growth of around 1.5 per cent.

“Profitability for Indian operators will remain under pressure over the next 12-18 months as pricing competition remains fierce,” the report said. It, however, said that Bharti Airtel subscriber market position is strengthening through industry consolidation – as well as the exit of players like Reliance Communications Limited will help offset some negative pricing pressure over the next 12-18 months.

“Although EBITDA contraction will be less severe for incumbents such as Bharti given its larger scale, we still expect the company’s organic EBITDA ( Earnings Before Interest, Taxes, Depreciation and Amortization) to contract around 10 per cent year-over-year to March 2018,” Moody’s said. In the longer term the rating firm expects Bharti Airtel’s profitability will benefit from operational and capital-spending synergies after completing its announced acquisitions. The telecom major is in process to acquire two mobile operators Telenor and Tata Teleservices.

“Moreover, Bharti will be a key beneficiary as the smaller players are forced out of the market – most recently Reliance Communications – and pricing stabilises as competitive dynamics ultimately result in a three-player market,” the report said. The rating firm said that it expects a few companies, including Indosat, Bharti Airtel, and NTT and its mobile arm NTT DOCOMO, to tap the bank or bond markets to fund upcoming debt maturities or capital spending.

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