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Operator profitability to remain under stress, says Moody’s Ratings

December 15, 2017

 

Credit ratings agency Moody’s assigned negative outlook for telecom sector and stated that the heightened rivalry between telecom service providers would continue to put strain on their revenue and margins over the next 12 months.

It further added that weak profitability coupled with high capex will keep leverage elevated over the next 12-18 months.

Moreover, it pointed that the entry of Reliance Jio Infocomm Limited (RJIL) has led to the decline of revenue of all incumbent operators including Bharti Airtel and Vodafone India. It added that industry consolidation would lead sector to become three-player market with Vodafone-Idea, Bharti Airtel, and RJIL.

The ratings firm has opined that the asset monetisation will be a key for reducing leverage. Moreover, telecom operators are turning to monetise their assets in order to ease out financial burden. In the latest development, Bharti Group has recently sold a 20 per cent stake in DTH arm Bharti Telemedia Limited to Warburg Pincus for $350 million to fund its 4G infrastructure deployment.

Telecom sector was the only non-finance space to have received a negative outlook from Moody’s. The ratings agency has ascribed stable outlook to most sectors in this space.

 
 

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