Asian telcos face risks due to changing business profiles

Asia-Pacific telecom operators will face increasing risks as their business profiles change, although the overall outlook for the industry is stable, a report from Standard and Poor's Ratings Services, published in Thailand-based newspaper The Nation, said.

"Deregulation, pressures on profitability from the change in the revenue mix to lower margin new services, higher capital-spending requirements, and declining market share are some challenges that Asia-Pacific telecom operators will face in the near to medium term," Yasmin Wirjawan, a Standard and Poor's credit analyst, wrote in a report.

Nevertheless, most telecom operators in the region had maintained stable credit quality in the past six months, benefiting from years of solid performance backed by high entry barriers, dominant market shares, and conservative financial profiles, the report said.

These operators also exhibited strong business profiles and improved financial risk profiles, placing them in a better position to weather any volatility, according to the report.

In line with global trends, Asia-Pacific telecom providers had to deal with declining growth in fixed-line services. Growth in this segment had stagnated due to substitution by wireless services and rationalization by increased broadband penetration, the report said. This was, however, partially offset by greater earnings diversity.

Standard and Poor's expected capital spending to increase in this segment as fixed-line operators replace their public switched telephone networks with next-generation networks, the report added.