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'SAMENA Daily' - News

Sri Lanka telecoms continue focus on Capex investment

Fitch Ratings said it expects average FFO adjusted net leverage for Sri Lanka Telecom and Dialog Axiata, the country’s market leaders in fixed and mobile services, respectively, to deteriorate to around 1.8x in 2018 from an estimated 1.7x in 2017.

Average FCF is likely to be negative as CFFO will fall short of the Capex requirements. Average operating EBITDAR margins will remain stable at around 32 percent against 32 percent in 2017, with improving economies of scale in data offsetting a changing revenue mix.

Average CFFO for SLT and Dialog is likely to remain stable around LKR24 billion in 2018 (2017: LKR24 billion). However, this will be insufficient to fund their large Capex plans averaging around LKR27 billion, leading to negative FCF of around LKR5 billion.

SLT’s and Dialog’s average Capex/revenue will remain high, at around 30 percent in 2018 against 30 percent in 2017, to expand the 3G/4G network coverage and fibre connectivity.

Average revenue growth will rise to around 7 percent-8 percent in 2018 from the mid-single digits in 2017 as consumers recover from the temporary tax-hike shock of November 2016. Data services are likely to grow by over 25 percent in 2018, and account for around 25 percent of total revenues, supported by the removal of the telecom operator levy on data services in September 2017, as well as proliferation of smartphones.

The number of subscribers for data services has risen by over 150 percent during 2013- 2017. Some industry consolidation is possible with ongoing intense competition in the mobile segment, as smaller unprofitable telecom operators face high investment requirements.

SLT and Dialog could acquire smaller telecom operators to strengthen their market position and consolidate spectrum assets and regain some pricing power. The regulatory-mandated floor tariffs on voice of LKR1.50 per minute offer little flexibility for smaller operators to compete.



Source: http://www.telecomlead.com/telecom-services/sri-lanka-telecoms-continue-focus-capex-investment-80568

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