Work-from-home to drive telecom investment; returns uncertain — Fitch

THE SURGE in data traffic due to the coronavirus disease 2019 (COVID -19) pandemic will drive telecommunications companies in Asia-Pacific countries to ramp up their spending on additional network capacity, Fitch Ratings said.

But increasing the return on such investments will remain a challenge for them, Fitch said.

In a statement emailed to reporters on Monday, Fitch Ratings said: “The rising use of online connectivity and remote access technology from home is likely to drive the need for greater capacity to maintain network resilience.”

It said the Philippines, apart from India, ranks the highest in the countries it covers in terms of average capital expenditures (capex) intensity “at around 40%, compared with the mid-20s average for the region.”

The likelihood that the Philippines to spend more to improve its network capacity is even higher compared to South Korea and Singapore as the third-world country remains generally dependent on mobile for its broadband access.

“Fixed-broadband markets in Indonesia, India, and the Philippines are significantly under-served due to the limitations of fixed-line infrastructure,” Fitch noted.

Despite the increase in data consumption during the lockdowns due to the COVID-19 pandemic, telcos will still not be able to earn higher returns.

“Fitch expects the growth in telecom revenue to lag behind data consumption, as telcos are seldom able to price data to capitalize fully on the rapid growth in traffic,” Fitch explained.

It added: “Some telcos have offered larger data allowance while maintaining current price plans as part of their response efforts. This is despite declining roaming revenues due to curbs on overseas travel. Closure of retail outlets due to self-isolation and quarantine measures imposed in some countries could also lead to slower gross subscriber additions in prepaid markets reliant on traditional distribution networks.” —