Fitch: Philippine telecoms facing risks

Fitch Ratings said its outlook on the major Philippine telecommunication operators, Philippine Long Distance Telephone Co. (BB+ foreign-currency issuer default rating and BBB local-currency issuer default rating with stable outlook) and Globe Telecom (BB+ foreign-currency issuer default rating and BBB- local-currency issuer default rating with stable outlook) remains broadly stable, but noted that event risk has come into greater focus in recent weeks.

Based on the companies' financials, Fitch cautioned that both operators have only moderate headroom for an increase in net debt at their current local currency issuer default rating levels.

Fitch said it does not anticipate any near-term changes to the existing industry structure, in view of the benign regulatory regime and limited capacity of smaller operators to sustain competition against the entrenched players.

Nonetheless, the key players are faced with rising business risk, the agency said. Major operators are grappling with evolving industry pressures in terms of slowing growth in traditional areas and rising investment needs for new growth areas such as consumer broadband, Fitch said.

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