KUALA LUMPUR: Moody’s Investors Service expects modest revenue growth of 2.5%-2.7% in 2020 for Asia Pacific telecommunication companies.
The credit rating agency said on Dec 4 that its revenue growth forecast is lagging the average 3.8% gross domestic product growth as the sector matures and becomes increasingly commoditised.
“Capital spending needs also remain high across the region, representing around 23% of revenue, and we expect more companies to fund their spending through asset sales and by reducing dividend payouts,” its vice president and senior analyst Nidhi Dhruv said.
She said capital spending remained high, in particular in emerging markets, as telcos invest in network infrastructure, while telcos in developed markets benefit from well-established networks, keeping capital spending below 20% of revenue.
“Telcos in Australia, China and Korea have already started offering 5G services, and Japan will follow in 2020,” she noted.
Meanwhile, companies’ liquidity is weakening with only a small cash surplus but remains supported by the telcos’ strong access to banks and the bond markets.
“Free cash flows are recovering to a more neutral position but are unlikely to turn positive, pressured by high capital spending, payments and shareholder returns,” Dhruv added. – Bernama
