Capex of telecom operators in Asia Pacific to increase 9 percent: Fitch

4G users want HD voiceMedian Capex (capital expenditure) of telecom operators in Asia Pacific will increase by around 9 percent – due to investment in 3G, 4G, fibre broadband and spectrum.

Countries with the most advanced networks — China, Korea, Malaysia and Singapore — will have stable or slightly reduced Capex in 2018, according to a statement from Fitch Ratings.

The growth and pricing of data services will be crucial in maintaining the credit quality of Asia-Pacific telecoms in 2018. Asia Pacific telecom operators are facing pressure due to secular decline in higher-margin fixed-line voice and SMS services.

“We expect the growth in data services will be sufficient to offset the loss of revenue in these legacy products. Median cash flow from operations for the APAC telecommunications portfolio will grow by around 2.5 percent,” Fitch Ratings said.

FCF will be worse than 2017 in many cases, though disciplined dividend policy will lead to only a moderate increase in debt. Median gross and net FFO adjusted debt will be largely unchanged at 2.5x and 2.1x, respectively (2017 forecast: 2.4x and 2.2x, respectively).

The telecom sector outlook for 2018 is stable, reflecting the ability of most Asia Pacific telecoms to manage their credit metrics and investment needs as data drives the industry’s transition.

In India, the most volatile telecom market in Asia Pacific, where the pricing strategy of Reliance Jio will be crucial in determining incumbents’ credit strength. Leading telecom operators in India are Bharti Airtel, Idea Cellular, Vodafone and BSNL.

The acquisition of media and digital marketing assets will enhance operators’ brands and extend reach across the value chain in more developed markets initially. 5G standards may be agreed in 2018, giving telecoms visibility to determine their strategy for the technology and the timetable for the investment required.