Telcos’ competition to stay tight, says Fitch

SHARES:

By:

@paolomontecillo

10:21 PM April 1st, 2013

Recommended
By: Paolo G. Montecillo, April 1st, 2013 10:21 PM

Competition between the country’s top telecommunications firms is expected to stay intense over the next few years as players fight to maintain and grow their market shares in a maturing industry, debt watcher Fitch Ratings said.

As a result, the industry’s profit margins will continue to decline as companies offer more bucket-priced promos, increase subsidies on mobile devices to attract new customers, and as consumers switch from high-margin long-distance calling to low-margin data applications.

“Fitch expects intense competition for subscribers will not ease over the short to medium term. This will result in a gradual margin decline,” the debt watcher said in a statement at the weekend.

“The operator’s aggressive marketing policies for wireless subscribers, including bucket tariff offerings and subsidies rather than differentiated services, will remain the basis of competition. Fixed-line revenue growth will remain weak as the contribution from long-distance calls continues to be replaced by low-margin data services,” it added.

Fitch’s analysis was included in its statement announcing a ratings upgrade for Philippine Long Distance Telephone Co. (PLDT), the country’s largest telco.

The company’s long-term foreign currency issuer default rating and senior unsecured rating was upgraded to ‘BBB’ from  ‘BBB-’, or one notch above Fitch’s ratings for similar securities issued by the Philippine government.

Fitch said PLDT’s ratings would have been higher, but this was constrained by the government’s own rating, “reflecting the country’s foreign-currency transfer and convertibility risk.”

PLDT’s long-term local currency and national long-term ratings were affirmed at ‘A-’ and ‘AAA (phl)’ respectively, or two notches above their Philippine government counterparts.

Fitch said PLDT’s ratings reflected the company’s dominant market shares with well over 60 percent in the wireless, fixed-line and broadband segments at the end of last year.

“The ratings also demonstrate the company’s strong financial profile, including a high earnings before income tax, depreciation and amortization (Ebitda) margin of 46 percent,” Fitch said.

Disclaimer: Comments do not represent the views of INQUIRER.net. We reserve the right to exclude comments which are inconsistent with our editorial standards. FULL DISCLAIMER
For feedback, complaints, or inquiries, contact us.