Competiton rising among telcos for data, broadband over take voice in Asia: S&P
20 Dec 2011
Competition among telecom companies in emerging Asian markets is showing signs of easing in some markets such as India, though it will remain intense.
A new report, Telecom Competition In Emerging Asia Is Creating Mixed Signals, by published yesterday by Standard & Poor's Ratings Services, says that the nature of competition is changing in the telecom industry in emerging Asian markets.
"With the penetration (ratio of telecom subscribers to the population) of basic wireless services at more than 70 per cent in many markets, the focus is now increasingly on data and broadband services from voice and SMS (text messaging) services," says Standard & Poor's credit analyst Mehul Sukkawala. "We expect competition to significantly intensify in data and broadband over the next one to two years."
Telecom companies are seeking to capitalise on 3G and other advanced services to improve average revenue per user and gain share, the report says. New technology plays an important role in boosting revenues of telecom companies in emerging markets.
Consolidation among telecom players is likely to diminish competitive intensity in the long term. But, for this to happen, telecom regulations that constrain consolidation would need to change, particularly in countries such as India and Indonesia.
The report observes that EBITDAR (earnings before interest, tax, depreciation, amortisation and rent) margins of leading telecom companies in emerging Asia are likely to remain on average 10 percentage points stronger than that of their counterparts in developed markets for the next two years. This is because companies in emerging Asia do not subsidise handset costs, use network and spectrum better, have low costs, and introduce technologies with a lag.
"Profitability of telecom companies in emerging Asia is likely to decline in the longer term as competition heats up and companies invest significantly in costly new technologies and on increasing capacity," adds Sukkawala.
Smaller telcos or late entrants in markets such as India and Indonesia that have a large number of players are likely to continue to become marginalised and register materially lower profitability than incumbent carriers.
