'Credit profile of mobile operators improves'

'Credit profile of mobile operators improves'

Agence France-Presse, Manila

Mobile telephone operators in Southeast Asia are significantly improving their credit profiles on the back of growing subscriber bases and revenues, Moody's Investors Service said on Monday.

The ratings agency said all its rated mobile phone issuers in the region exhibited enhanced financial conditions, benefiting from a strong uptake in cellular telecommunications in essentially under-penetrated environments.

According to a Moody's study, mobile phones have now become the principal mode for voice transmission in Thailand, Indonesia, Malaysia and the Philippines.

The study covered only the region's four emerging economies and excluded Singapore, whose cellular market is one of the most competitive in Asia, marked by high penetration rate, with eight out of 10 residents in the city state a mobile subscriber.

"Most major operators in these countries -- by achieving critical subscriber mass -- have secured greater certainty in their abilities to fund growth, access capital markets to refinance maturing debt and provide investors with returns," says Charles Macgregor, Moody's vice president and senior credit officer.

"Consequently, Moody's believes that the ability of operators to meet their funding needs -- covering investments and maturing debt -- has become a diminishing concern," Macgregor said.

The report said the credit profiles of the region's mobile operators had improved in the six years since the 1997-1998 Asian financial crisis, partly reflecting enhanced economic fundamentals and better technology.

"Going forward, given the healthier financial and operating profiles, strategic investor support may not be as critical as before," Moody's said.

"And now that the threat of corporate collapse has eased dramatically, for most rated operators it is more an issue of sustaining competitive positions."

However, the Moody's report also cautioned that the region's operators were still exposed to "varying degrees of risk from macroeconomic trends, political volatility, and to a lesser extent foreign exchange moves and regulatory changes."

The region's regulatory environments currently pose a "moderate level of risk," Moody's said.

In the coming 12 to 24 months, Moody's said, decisions by regulators -- centering on tariffs and interconnections -- were likely to be the next source of regulatory impact on credit profiles.

Other challenges include the need to cut costs to grow profits as cellular penetration nears saturation, greater sensitivity to economic activity, shareholder pressure for higher returns and regulatory pressure to keep tariffs low.

Macgregor noted the region's telecoms regimes continued to evolve and that the importance of earlier concerns -- such as liberalization time frames and competitor numbers -- had become less significant.

"Uncertainties, however, over issues such as tariff structures, taxation, access and interconnection regimes persist," he said.