THURSDAY, March 28, 2024
nationthailand

Telecoms firms to remain under pressure in 2016

Telecoms firms to remain under pressure in 2016

The Thai telecommunications industry will remain under pressure in 2016 from slow revenue growth, intense market competition and the high investment needed for new spectrum acquisition and network expansion, according to Fitch Ratings.

Industry revenue will increase by a low-single-digit percentage in 2016, driven by growth in mobile data services, Fitch forecasts. Voice revenue will continue to decline as the market saturates, and data cannibalises voice and text revenue.

Margin improvement in 2016 is likely to be slow because the benefit from regulatory-cost savings is likely to be offset by an increase in marketing expenses and network operating costs due to intense competition.

The acquisition of new spectrum and the expansion of fourth-generation networks will drive capex investment. As a result, most telecoms’ free cash flows (FCFs) are likely to be negative, and their financial leverage will increase over the next two years.

Nevertheless, the rating outlooks of Advanced Info Service (AIS, BBB+/AA+(tha)/Stable) and Total Access Communication (DTAC; BBB/AA(tha)/Stable) remain stable.

This is mainly because their current ratings incorporate large buffers against the likelihood of low EBITDA (earnings before interest, taxes, depreciation and amortisation) growth and negative FCF. Nevertheless, the deterioration in credit metrics also suggests that greater pressure is building on the ratings.

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