Moody’s: Stable outlook for APAC telecoms sector on revenue growth, positive free cash flows

KUALA LUMPUR: Revenue for Asia-Pacific’s (APAC) telecommunications sector will grow between 3.5 per cent and 4 per cent in 2022 as consolidation likely to ease competition in some emerging markets and developed markets will see early gains from 5G adoption, said Moody’s Investors Service Singapore Pte Ltd.

Revenue growth, however, will lag average regional gross domestic product growth of 5 per cent as the sector matures, vice-president and senior analyst Nidhi Dhruv said.

Citing Moody’s latest report, she said that for APAC’s telecommunications sector, competition and scale benefits would drive consolidation in 2022-23 in some emerging markets, while free cash flow will turn positive despite high capital spending as companies rein in shareholder returns.

“Capital spending remains high at around 22 per cent-23 per cent of revenue as telcos accelerate 5G spending.

However, most will fund spending largely using internal cash.

Emerging market telcos in APAC will lead capital spending at around 30 per cent of revenue in 2022, to enhance existing networks and initial investments in 5G,” she said in a statement yesterday.

Meanwhile, developed market telcos’ capital expenditure to revenue will remain stable at around 14 per cen as they benefit from wellestablished networks.

She also said despite the high capital spending, APAC telcos’ free cash flow will turn positive as companies reduce shareholder payments.

“Refinancing risk is manageable for most APAC telcos, with only 12 per cent-15 per cent of total debt maturing in 2022. Moreover, APAC telcos’ access to bond and bank funding will likely remain strong.”