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January 9, 2024
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Industry Credit Outlook 2024
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Contributor
Tatjana Lescova
Telecoms
Healthy connectivity demand supports credit quality
January 9, 2024
This report does not constitute a rating action.
What's changed?
Inflation curtails profitability growth but EBITDA margins are still growing on price rises and
efficiency programs.
Lower debt issuance. This reflects choppy capital markets, higher interest rates, and back-
ended maturity walls.
Mergers and acquisitions (M&As) have increased in some markets. Telcos are seeking market
consolidation to relieve competitive pressure.
What are the key assumptions for 2024?
Steady earnings for 2024. A 3%-4% EBITDA growth in 2023-2025 on higher revenue and margins,
given stable demand.
Intense competition in some markets. Higher churn rates and lower average revenue per user
(ARPU) levels, given poor market conditions.
Varying capital expenditures (capex). Cuts in capex on lower 5G and fiber spending in developed
markets, unlike in markets with lagging rollouts.
What are the key risks around the baseline?
Lower cash flow if interest rates stay high. This is the case for companies with near-term
refinancing or unhedged floating-rate debt.
A recession could raise competition. Discounted offerings to maintain customer loyalty could
jeopardize pricing and margins.
Risks from higher-than-expected investments, M&As, or shareholder returns. These factors
could erode credit metrics.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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Ratings Trends: Telecoms
Chart 1
Chart 2
Ratings distribution
Ratings distribution by region
Chart 3
Chart 4
Ratings outlooks
Ratings outlooks by region
Chart 5
Chart 6
Ratings outlook net bias
Ratings net outlook bias by region
Source: S&P Global Ratings
. Ratings data measured at quarter-end.
0
5
10
15
20
25
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC
C
SD
D
Cable & Satellite Telecoms
0
5
10
15
20
25
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
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B
B-
CCC+
CCC
CCC-
CC
C
SD
D
North America Europe Asia-Pacific Latin America MEA
Negative
18%
WatchNeg
3%
Stable
72%
WatchPos
1%
Positive
6%
0%
20%
40%
60%
80%
100%
APAC LatAm N.America Europe
Negative WatchNeg Stable WatchPos Positive
-20
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-5
0
2015 2016 2017 2018 2019 2020 2021 2022 2023
Telecommunication Services
Net Outlook Bias (%)
-80
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-40
-20
0
20
40
2015 2016 2017 2018 2019 2020 2021 2022 2023
N.America Europe
Asia-Pacific Latin America
Net Outlook Bias (%)
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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Industry Outlook: Global
Ratings trends and outlook
Rating trends in the sector were moderately negative, with 39 downgrades, compared to 17
upgrades. The downgrade bias was mainly driven by the U.S. and Latin America (LatAm), and we
expect this trend to continue. While about 72% of the telecom issuers have a stable outlook,
negative outlooks increased, especially in North America and LatAm. In North America, the
negative outlook bias has been mainly due to high interest rates and capital structures that can't
absorb rising interest costs. In Chile and Colombia, intense competition and high capital needs
hindered companies' cash flow, and consequently, increased leverage and tightened liquidity,
which continued to weigh on credit metrics. Two percent of the region's rated issuers have a
negative CreditWatch listing, mostly reflecting high refinancing risk and the increased potential
for a downgrade.
In Europe, positive outlooks and CreditWatch positive placements have increased to 16% from 3%
a year ago, and it's the only region with a positive rating bias. This is mainly because of M&As that
reduce leverage or strengthen business profiles, the improvement in credit metrics, and revised
sovereign outlooks in the region, such as that on Turkey. Overall, investment-grade companies
constitute around one-third of the rated telecom entities, while the remaining ones are at
speculative grade, primarily in the 'B' category.
For 2024, we continue expect stable trends. We expect moderate earnings growth as demand for
data remains solid. EBITDA margins will be somewhat better because issuers are taking stringent
cost-control measures to cope with higher operating costs and weaker global economic trends.
We expect divestments will continue, given the need to create balance-sheet capacity for
investments in networks or new revenue streams in business segments adjacent to traditional
telco services to boost long-term earnings potential, especially in Asia-Pacific (APAC), LatAm, and
the Gulf Cooperation Council (GCC). However, in the U.S., adverse trends will remain in place
across telecom and cable issuers, as about 20% of the rated entities are in the 'CCC' rating
category. Many of these issuers have floating-rate debt, so if high interest rates and volatile
economic conditions continue, cash flow will weaken, hurting liquidity.
Main assumptions about 2024 and beyond
1. Earnings will remain steady for 2024.
We expect revenue growth averaging 2% for 2024, thanks to increased mobile data traffic, fixed
mobile adoption in some markets like the U.S., lingering inflationary cost pass-throughs, and
stable demand for telecom services in general.
2. Intense competition will continue.
High competition in markets with four or more players will remain in place, pressuring ARPUs
and profitability.
3. Capex growth will vary regionally.
Capex will depend on the investment cycle that companies are in, with respect to the
deployment of 5G and fiber technology.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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Earnings will remain steady for 2024. Overall, we expect top-line growth for telcos will remain
stable across regions. We expect growth in low- to mid-single-digits in most of the regions,
reflecting stable demand for telecom services despite high competition, while a focus on cost-
efficiency measures should support earnings growth.
In the U.S., wireless service revenue is likely to grow about 3% during this year and 2.5% in 2024
due to rate increases on legacy plans, customer migration to more expensive 5G plans, and
growth from fixed wireless access (FWA). For cable operators, we expect a low-single-digit
growth during 2024, reflecting broadband ARPU growth, improving wireless economics, business
services, and footprint expansion.
In Canada, we expect mid-single digit growth in 2024 because of high immigration-led
population growth and increasing penetration, partly offset by higher churn and increased
competition, among other macroeconomic effects.
In Europe, we expect top-line growth to average 1%, slowing with inflation. Still, more
sustainable competition levels should allow continued contract-based price increases on post-
paid subscriptions, ad-hoc increases, and reduced promotional discounts for new customers.
Combined with margin improvements, earnings are poised to grow 3%-4%
In LatAm, revenue growth will be modest, in line with the expectations for economic growth in
the region.
In APAC, we expect mid-single-digit revenue growth for 2024, given increased mobile data
traffic and fixed broadband adoption.
Intense competition in some markets will continue. Highly competitive market conditions,
including the entrance of new players in some markets, have been disruptive for existing
participants. Several telecom operators have been struggling to retain market share and have
experienced churn-rate increases. To maintain market share, these companies have cut prices
and extended promotional packages, lowering ARPU. This, together with cost pressures, could
drag down companies' profitability and earnings. In this scenario, we will see weaker-than-
average performance in countries with high competition.
In Italy, for example, Iliad Holding S.A.S. is a recent entrant and aggressive competitor that has
quickly increased market share, limiting overall growth in the domestic market compared with
other markets in Europe. Similarly, with the entrance of WOM S.A. into the Colombian and Chilean
markets, several telecom operators have been experiencing a decline in ARPUs to defend their
customer base amid intense competition.
However, in markets with three or fewer operators and with balanced market shares, we may see
better performance. Such markets, sometimes as a result of consolidation, tend to be more
stable and have lower churn levels. If supported by a predicable regulatory framework and higher
interest rates suppressing non-sustainable pricing, competition should moderate, improving
prices, and increasing growth prospects.
Capex is down overall but varies regionally. Capex will depend on the state of 5G and fiber
rollout of telcos. Investments have fallen in 2023 in the U.S., Canada, and EMEA markets, where
deployment is in the final stages. Fiber rollout is near completion for many markets in these
regions, and 5G spending has slowed down after extensive investments for initial rollouts. We
expect a 10% decline in capex among U.S. telcos, based on a slower pace of investments in
wireless and wireline services.
We also expect average capex intensity in EMEA will fall and remain near 17% of revenue, down
from its 20% peak in 2021, which should continue to improve cash flow and financial flexibility.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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The same approach has been evident in Canada, where we expect telcos will ease capital
intensity to bolster free operating cash flow (FOCF) during 2024.
In APAC, as the first wave of 5G investments is over, companies are more focused on network
quality spending, while investments for new technology will remain cautious.
Meanwhile, LatAm remains in the initial stages for 5G, and capex will remain elevated. We believe
that incumbent players are more likely to be the main 5G providers due to their greater financial
flexibility with higher profitability margins and stronger liquidity positions, allowing for larger
investments in the new technology.
Credit metrics and financial policy
We expect modest improvement in credit metrics through 2024, but the positive rating
momentum will require clearer financial policy commitments. Most operators are generating
modest EBITDA growth and cash flow because of cost-cutting initiatives and lower capex. As a
result, we expect some improvement in FOCF and increased financial flexibility. But because of
our forecast of a relatively low growth, persistently high interest rates, and lingering inflation
(especially on the labor front), financial policies will need to prioritize debt reduction to translate
better cash flows into rating upside, especially when refinancings arrive and capital structures
reset at higher rates.
We expect asset sales to continue during 2024. Telcos started selling tower portfolios and, more
recently, fixed-network assets. These sales have improved telcos' financial flexibility by
strengthening their balance sheets, and could have a significant impact on reducing investment
requirements, boosting FOCF in 2024. But this trend may be compromised if the sales of
strategic assets impair telcos' business profiles, a risk we view more prominently with fiber sales.
Key risks or opportunities around the baseline
1. Lower cash flows for operators with leveraged capital structures if interest rates remain
high.
Companies with refinancing needs or unhedged floating-rate debt face higher interest rates,
which will weaken cash flow and interest coverage metrics, increasing ratings pressure.
2. A recession could heighten competition if reduced discretionary spending makes
consumers more price sensitive.
Telcos may expand offers of attractive products and packages to maintain customer loyalty,
hampering their ability to maintain or increase pricing, eventually eroding margins.
3. Increasing investments or shareholder returns could limit credit metric improvements.
If companies start facing pressures for higher shareholder returns or accelerated investments,
credit metrics could deteriorate.
Cash flows of telcos with leveraged capital structures could fall if high interest rates continue.
Telcos will have to navigate a slower economic growth environment, and high inflation and
interest rates. This could pressure speculative-grade issuers in particular, for which high leverage
makes liquidity management, FOCF, and interest coverage key to maintaining creditworthiness.
We have seen companies taking advantage of low interest rates in the recent past, and liability
management has been essential in preventing refinancing risks. However, companies with
significant short-term debt maturities or unhedged floating-rate debt face higher interest rates,
which will dent cash flow and interest coverage metrics, ratcheting up pressure on ratings.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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Prolonged high interest rates could also constrain access to capital markets for some
companies, weakening liquidity.
A recession could heighten competitive pressure
if reduced discretionary spending makes
consumers more price sensitive. If telcos need to expand offerings of attractive products and
packages to maintain customer loyalty, it could hamper their ability to maintain or increase
pricing. Price competition could increase churn and weaken ARPU and revenue as companies will
need to lower prices and bundle packages to retain customers. This could result in slower
upgrades to higher-priced plans and longer handset replacement cycles, especially in the price-
sensitive and predominantly prepaid markets.
Increasing investments or shareholder returns could limit credit metric improvement.
We
believe companies will maintain financial discipline amid the currently weak economic
environment. In regions where moderate EBITDA growth and declining capex are improving cash
flow and financial flexibility, we expect a balanced approach to deleveraging, investments, and
shareholder returns. However, if companies start facing pressures for higher shareholder returns
or accelerated investments, including debt-funded M&As, their credit metrics could weaken.
Industry Outlook: North America
Rating trends and outlook
More negative rating actions in 2024. Notwithstanding solid industry fundamentals, downgrades
outpaced upgrades by five to one in the U.S. due to high interest rates and capital structures that
couldn't absorb rising interest costs. About 20% of the rated telecom and cable issuers in the
U.S. are now in the 'CCC' category, and the outlook bias is increasingly negative, with about one-
third of our ratings on a negative outlook or on CreditWatch with negative implications.
In 2024, we expect downgrades will continue to outpace upgrades across U.S. and Canadian
telecom and cable operators, as highly leveraged capital structures are increasingly stressed by
elevated interest expenses, primarily among issuers in the lower end of the ratings scale. We
therefore expect the percent of issuers in the 'CCC' category to increase. Many of these
companies have a significant amount of floating-rate debt that will depress cash flow and
liquidity.
Main assumptions about 2024 and beyond
1. Modest service revenue and earnings growth in the wireless market.
We forecast a 2.5% industry service revenue and 5% EBITDA growth in 2024 due to rate
increases, customer migration to more expensive 5G data plans, postpaid net adds, and
growth from FWA.
2. A low-single-digit EBITDA growth for cable in 2024.
We project modest EBITDA growth will primarily stem from higher broadband ARPU, footprint
expansion, business services, and improving wireless economics for the larger operators,
which will be partly offset by modestly lower broadband penetration levels due to elevated
competition from FWA and fiber to the home (FTTH).
3. Telcos' capex to decline, while cable investments to increase.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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We expect capital intensity to decline in the wireless segment as carriers wind down their
initial 5G network builds. In the cable segment, we expect capex to increase modestly to enable
multigigabit download speeds and at least 1 Gbps upload speeds.
U.S. wireless subscriber and service revenue growth to slow in 2024. Overall, wireless postpaid
subscriber trends remained healthy during the first nine months of 2023 despite maturing
industry conditions, although cable took a larger share. We expect more of the same in 2024 (see
chart 7), although the pool of potential customers continues to shrink, and we forecast a 7%-9%
decline in postpaid phone net adds during the year. Furthermore, we expect cable’s share of
postpaid phone net adds will increase to almost 52% from 45% in 2023.
Excluding Verizon Communications Inc.'s reclassification of wireless "other" revenue into service
revenue, we expect overall industry wireless service revenue growth of about 3% in 2023, down
from 4% in 2022. Notwithstanding our expectation for slowing postpaid subscriber growth and
prepaid losses, we forecast the industry's service revenue will rise by about 2.5% in 2024 due to
rate increases on legacy plans, customer migration to more expensive 5G rate plans, and growth
from FWA. We also expect upgrade rates will remain low in 2024 as consumers hold on to their
handsets for longer periods, given the limited appeal of new devices and the migration of
customers to three-year contracts from two years, which reduces monthly handset expenses.
While this will continue to pressure equipment revenue, it also benefits carriers' profitability since
they don't earn any money from handset sales. Coupled with cost-reduction initiatives and
improved spectral efficiency from 5G wireless technology, we expect 3% earnings growth in 2024,
somewhat lower than our forecasted 5% growth in 2023.
Chart 7
U.S. wireless annual service revenue growth rate
a—Actual. e—Estimate. Source: S&P Global Ratings.
Cable earnings to grow in low-single digits in 2024, aided by wireless (see chart 8). We project
that modest EBITDA growth will primarily result from higher broadband ARPU, footprint
expansion, business services, and improving wireless economics for the larger operators, which
will be partly offset by modestly lower broadband penetration levels due to elevated competition
from FWA and FTTH.
We believe attractively priced mobile wireless serves as a powerful broadband churn reduction
mechanism for large cable operators. Given the capital-light nature of the service and that these
operators aren't running wireless to maximize stand-alone profits, we believe they can match or
exceed any discount on broadband offered by a FWA or FTTH competitor, particularly
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Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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considering the average wireless spend is 3x the in-home broadband bill. We believe this will
continue to limit subscriber losses, despite elevated competition.
Separately, for large cable operators, we believe wireless offerings will bolster EBITDA growth in
the next three years as the drag from new customer additions is more limited, start-up costs
ease, and overhead can be spread over a larger customer base. Both Comcast Corp. and Charter
Communications Inc. have about 10% of broadband homes on wireless plans, so we believe there
is substantial room for growth with an economically healthy mobile virtual network operator
(MVNO). We believe the economics will improve over time as these companies move traffic on-
network, utilizing their holdings of Citizens Broadband Radio Service spectrum licenses via stand-
mounted small cells.
For smaller operators, we believe wireless will be a drag on profitability initially. It took Comcast
about four years to reach stand-alone profitability. Given their more limited scale, these smaller
operators may not receive such attractive terms on their wholesale MNVO arrangements, which
could limit their ability to price as aggressively as Comcast and Charter. Furthermore, certain
highly leveraged operators such as Altice USA Inc. don't have the financial flexibility to absorb
wireless losses, which could limit their effectiveness.
Chart 8
U.S. cable industry weighted average EBITDA growth
a—Actual. e—Estimate. Source: S&P Global Ratings.
In Canada, we expect telecom revenue to rise by low- to mid-single-digits. The Canadian
industry is largely vertically integrated, including significant media ownership. Following the
merger of Rogers Communications Inc. (RCI) and Shaw Communications Inc. earlier this year, the
three incumbent players (Bell Canada Inc., RCI, and Telus Corp.) generate more than 90% of
Canadian telecom revenue. We anticipate underlying earnings growth for the sector in 2024 to
stem from immigration-led population growth, sustained ARPU, strong roaming revenue, and
digitization, offsetting higher competition, weakening affordability, inflation, and other
macroeconomic effects. However, large restructuring charges will undermine reported earnings.
We also believe lower wireless penetration (than in the U.S. and Europe) and increased
immigration through 2025 will continue to support wireless revenue growth.
Canadian carriers have benefited from the convergence approach, and we expect them to further
integrate their services and support bundled offerings, increasing competition. With FTTH
covering a significant portion (70%-80%) of Bell's and Telus' broadband footprints, competition
has surged in the broadband space, with telcos getting most of the net adds compared with
cable operators. At the same time, with RCI completing the merger with Shaw and Videotron Ltd.
acquiring Freedom Mobile Inc.'s wireless assets earlier in 2023, we expect competition to
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Industry Credit Outlook 2024: Telecoms
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increase in the wireless and broadband sectors as both RCI and Videotron start providing
services nationwide. We view Telus as most at risk from the increased competition in western
Canada. In our view, both competitive and regulatory risks are likely on the rise in the near term.
Telcos' capex will continue to decline in 2024. We expect U.S. telcos' capex to drop by about
10% in 2024 following an approximate 12% fall in 2023. We base our forecast on the following
factors:
• We expect wireless capex to decline by about 9% in 2024 as mid-band spectrum
deployments are largely completed and the initial surge from 5G spending winds down.
Furthermore, T-Mobile US Inc. continues to realize capex synergies from its acquisition of
Sprint Corp.
• Wireline capex to decline by about 10% in 2024 following a 1% increase in 2023 as the wireline
operators scale back their FTTH builds to conserve cash flow amid high interest rates.
Lumen Technologies Inc. announced that its capex will decline by $200 million-$300 million
in 2024 as it moderates the pace of fiber builds. Consolidated Communications Holdings Inc.
plans to pass 75,000 homes in 2024, down from 222,000 in 2023. While we expect Frontier
Communications Holdings LLC will maintain its fiber build pace of about 1.3 million passings,
we also believe it will increase its mix of lower-cost deployments (i.e. lower cost per passing).
In line with the U.S., capex among Canadian telcos is also likely to decline as both Telus and BCE
Inc. complete the majority of their fiber build and return capex to normal levels; BCE has
announced it will curb capex by an additional $1 billion in 2024-2025 in response to the regulatory
decision. We expect telcos' easing capital intensity to strengthen FOCF in 2024. RCI's capex, pro
forma the merger with Shaw, as well as that of Videotron are likely to increase significantly but
still stay within the usual capital intensity level. Overall, capital intensity among Canadian players
will remain in the 16%-18% range of telecom revenues. The C-band spectrum auction spending
was only $1.9 billion for incumbents (including Videotron), although cash payments are not due
until the second quarter of 2024.
Cable capex will increase in 2024.
We believe the coaxial network upgrade cycle that most cable
operators will embark
on in the next three years is necessary and will provide a path toward long-
term ARPU growth while also serving to protect existing market shares. These upgrades are
within the historical capital spending levels of 12%-14% of revenue and can be achieved for a
relatively affordable amount of $100-$200 per home passed. These investments will enable
multigigabit download speeds and at least 1 Gbps upload speeds, which are important from a
marketing and competitive standpoint.
We also view rural footprint expansion favorably, provided that it doesn't increase financial
leverage but rather comes in lieu of shareholder returns, which we expect for most cable
providers. Government-subsidized rural footprint expansion will help drive subscriber and EBITDA
growth because there's no competition from fiber in these markets, so customer penetration will
likely be above average. We believe this will be the primary driver of subscriber growth in the
future, given the increasingly competitive and mature conditions in incumbent markets.
Credit metrics and financial policy
We expect modest improvement in credit metrics for large telcos. We assume earnings growth
and lower capex will improve FOCF and adjusted leverage in 2024 (see chart 9). That said, our
base-case forecast doesn't include any shareholder distributions beyond what has been
communicated by the companies, although we believe there's greater risk that new share
repurchase programs are initiated by AT&T Inc. and Verizon, which limits leverage improvement.
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January 9, 2024
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For T-Mobile, we expect shareholder distributions will offset earnings growth and FOCF, such
that leverage remains steady in the mid-3x area.
Chart 9
U.S. wireless adjusted debt-to-EBITDA
a—Actual. e—Estimate. Source: S&P Global Ratings.
Wirelines continue to face headwinds in 2024. While the outlook for U.S. wirelines could be
favorable in the longer term, we expect challenges to persist in 2024, resulting in weak credit
metrics at a time when they're trying to reverse the trajectory of earnings declines. High interest
rates, inflation, and exposure to legacy revenues such as multiprotocol label switching (MPLS)
and digital subscriber line services will continue to weigh on credit quality of U.S. wirelines as
they transition their business to FTTH.
We expect overall pressures to continue in 2024 with revenue declining 4%-5%, although results
will vary by provider, depending on how far along they are with their fiber builds. At the same
time, we expect revenue from business services will continue to fall by high-single digits due to
reduced IT spending and exposure to legacy products and services. However, our base-case
forecast assumes the industry will begin to see favorable earnings trends by 2025 due to the
following:
• Increasing fiber coverage should start to yield benefits even if the fiber broadband
subscriber growth is not sufficient to offset losses from copper, since FTTH customers
typically generate higher ARPUs, which should rise over time as they move to higher-tier data
packages.
• Greater scale and cost-cutting initiatives following several years of buildout activity.
• Potential recovery in IT spending once economic growth picks up in 2025.
Despite our expectation for lower capex in 2024, we expect credit metrics, including adjusted
leverage, will remain weak during the year because we assume higher interest expense will
continue to pressure FOCF even if industry EBITDA grows (see chart 10).
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Chart 10
U.S. wireline adjusted debt-to-EBITDA
a—Actual. e—Estimate. Source: S&P Global Ratings.
Credit metrics in the Canadian telecom industry should show modest improvement through
2024. Telcos' easing capital intensity should strengthen FOCF in 2024 and afterward for BCE and
Telus. RCI continues to deleverage, and our base-case scenario assumes leverage to hit low-4x in
the third year following the close of the merger. In our view, the C$2.2 billion paid by the industry
for the 3.8 GHz spectrum auction (significantly lower than the 2021 $8.5 billion 3.5 GHz spectrum
auction) and moderating capex partly compensate for the increasing competitive intensity,
regulatory headwinds, and aggressive financial policy, which we view as risks to a consistent pace
of deleveraging.
U.S. cable credit metrics should remain stable in 2024
. We expect U.S. cable providers' adjusted
debt to EBITDA will be relatively stable as most operators are still generating modest EBITDA
growth and cash flow, with the ability to manage leverage according to their targets. However,
financial flexibility will decline, given elevated capital spending associated with network upgrades
and footprint expansion, which will pressure the FOCF-to-debt metric to some degree.
Key risks or opportunities around the baseline
1. High-for-longer-interest rates and looming debt maturities weigh on high-yield credits.
While investment-grade companies should be able to manage their debt refinancing, there's
greater risk for speculative-grade U.S. telecom and cable issuers, specifically at the lower end
of the rating scale.
2. U.S. telcos may allocate excess cash flow to shareholder returns.
We currently expect telcos to generate greater FOCF and focus on leverage reduction.
However, lagging stock prices could push companies to allocate a larger share of their FOCF to
shareholder returns.
3. FWA and FTTH competition causes broadband subscriber losses to increase, leading to
lower earnings.
While we currently forecast a 3.0%-3.5% EBITDA growth, increasing competition from FWA and
FTTH could result in high-speed data (HSD) subscriber losses, reducing earnings.
High-for-longer interest rates could strain speculative-grade rated issuers. That said, overall,
we believe the speculative-grade telecom and cable sector has sufficient breathing room for
deleveraging or to refinance well in advance of their debt maturities. We estimate there's about
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Frontier Lumen Windstream NW Fiber (Ziply) Consolidated
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$6 billion of speculative-grade telecom and cable debt that matures in 2024, or 2% of the total
(see chart 11). The amount increases to about $17.5 billion in 2025 (6%) and to $25 billion in 2026
(9%). Among issuers rated 'B' and below, we estimate that about $5.5 billion of debt matures in
2024 (4%), $8 billion in 2025 (7%), and $16 billion in 2026 (13%). The big refinancing wall for
speculative-grade U.S. telecom and cable issuers won't occur until 2027, when almost 24% of
outstanding debt will need to be refinanced, and among issuers rated 'B' and below, the percent
will be about 30%.
Chart 11
U.S. speculative-grade telecom and cable debt maturity profile
Source: S&P Global Ratings.
Not surprisingly, issuers that have the greatest refinancing risk are in the 'CCC' category and
include:
• Dish Network Corp./DISH DBS Corp.: The company faces large debt maturities of $2.9
billion in 2024, $2.0 billion in 2025, and $7.7 billion in 2026, while generating a FOCF shortfall.
While the company's proposed all-stock merger with Hughes Satellite Systems Corp. will
bolster its liquidity position--which includes about $2 billion of cash, marketable
investments, and $250 million-$300 million of FOCF--it will be very difficult for Dish to
refinance its upcoming obligations at an affordable rate.
• Lumen:
The company entered into a transaction support agreement (TSA) with a group of its
creditors holding about $7 billion of its outstanding debt. The company currently has about
$1.7 billion due in 2025, $498 million in 2026, and $9.5 billion due in 2027. While the TSA would
enable the company to push out the bulk of its debt obligations to 2029 and 2030, giving it
time to execute its turnaround strategy, the agreement still doesn't have enough support
from its creditors to initiate the transaction.
• Anuvu Corp.:
The satellite connectivity provider's adjusted leverage remains elevated, at
above 10x, and higher interest rates have depressed the company's FOCF and liquidity. While
there's no debt repayment due in 2024, almost half of its debt obligations come due in 2025
and the remaining amount in 2026.
• Logix Intermediate Holdco.: The fiber bandwidth provider has about $175 million of first lien
debt due in December 2024 and another $125 million of second lien debt due in 2025.
Increasing pressure for shareholder returns could constrain the improvement in credit metrics
of large U.S. telcos. Both AT&T and Verizon raised their free cash flow guidance for 2023 due to
cost savings, working capital efficiencies, and better operating trends. AT&T increased its free
cash flow outlook to $16.5 billion from $16.0 billion, notwithstanding the use of excess cash flow
to pay down its vendor and direct supplier financing obligations, which we include in our adjusted
0%
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2024 2025 2026 2027 2028
(Mil. $)
Debt maturities (left scale)
% of total debt (right scale)
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leverage calculation. Verizon raised its free cash flow guidance to $18 billion from $17 billion
despite capex coming in at the higher end of its $18.25 billion-$19.25 billion guidance.
While we expect telcos to prioritize debt reduction, given high interest rates, lagging stock prices
could prompt companies to increase shareholder returns sooner than expected. Verizon's
reported net unsecured debt to EBITDA was 2.6x as of Sept. 30, 2023, and management
indicated it could buy back stock once this metric hits 2.25x. We believe the company can reach
this leverage level by mid-2025. However, we believe there's greater risk that it initiates a share
repurchase program prior to reducing its net unsecured leverage to 2.25x if equity returns don't
improve. Similarly, we believe AT&T will reach its net leverage target of 2.5x in the first half of
2025, but the need to appease shareholders may force management to repurchase shares at the
expense of creditors.
We could adjust our rating triggers for cable operators if business prospects weaken and
competition is more intense than we expect. Although currently not part of our base-case
scenario, if competition from FTTH and FWA increases, resulting in persistent earnings declines
for U.S. cable providers, we could revise our rating triggers. This could be caused by higher-than-
expected FWA subscriber growth and network investments, FTTH penetration exceeding our
long-term expectations of about 55% of the U.S., or greater-than-expected pricing pressure from
new competitors. Therefore, we will be closely monitoring operating metrics such as HSD ARPU
growth, HSD subscriber trends, wireless growth and profitability, and footprint expansion
initiatives.
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Industry Outlook: EMEA
Ratings trends and outlook
We expect stable ratings in 2024, thanks to incremental revenue and profitability gains, and
lower capex. As inflation subsides, price hikes will moderate and revenue growth is likely to slow
in 2024. However, EBITDA growth and lower capex should continue to improve cash flows and
financial flexibility, and the rating headroom potential, though only sufficient for the rating upside
in a few cases.
We enter 2024 with negative outlooks and CreditWatch placements on 6% of our ratings (down
from 18% a year ago). This is more than offset by positive outlooks and CreditWatch placements,
resulting in a positive bias of about 10%. The decline in negative outlooks and CreditWatch
placements partly reflects the resolution of prior outlooks to downgrades. The remaining
negatives reflect weak credit ratios (Bouygues S.A.) as well as refinancing and sustainability
concerns (TalkTalk Telecom Group PLC and Eolo S.p.A.).
Positive outlooks have increased to 16% and stem from M&As (TIM, PPF Telecom Group B.V., and
Lorca Telecom BidCo S.A.U.), improving credit metrics (Swisscom AG, Cellnex Telecom S.A., and
United Group B.V.), and revised sovereign outlooks that cap our ratings (Turk Telekom and
Turkcell IIetisim Hizmetleri S.A.). Of our European telecom ratings, 78% carried a stable outlook
(compared with 70% a year ago), and Europe has the strongest regional balance globally.
Downgrades and upgrades in 2023 were balanced at five each, reflecting the sector's stability, as
80% of ratings were unchanged. Downgrades resulted from idiosyncratic, rather than sector-
wide, operational factors. These included leveraged financing for M&As (Eutelsat
Communications S.A.), weak credit ratios and cash flow shortfalls (Proximus S.A., Altice France
S.A., and TalkTalk), along with Tele Columbus AG, which we downgraded twice on its path to
default. This was balanced by our upgrades stemming from deleveraging (Deutsche Telekom AG,
Matterhorn Telecom S.A., and Zacapa S.a.R.L.), and for upgrades of linked entities (Hellenic
Telecommunications Organization S.A. and Turkcell).
Main assumptions about 2024 and beyond
1. Revenue gains will likely slow as inflation begins to abate, and earnings rise on margin
growth.
We expect revenue growth averaging 1% in the next two years, lower than in the last two years
as slowing inflation dampens CPI-linked price increases. Cost control from efficiency
programs, realization of synergies, and lower energy costs will increase margins and EBITDA
gains, despite labor costs that will continue to climb.
2. Capex will decline to a sustainably lower level for the next few years, improving cash
flow.
We think telcos' capex to support fiber and 5G mobile rollouts peaked in 2021 at 21% and will
decline to about 17% in 2023. This new level should be sustainable, improving FOCF, though
we expect variation around the average based on the degree of buildout progress in various
markets.
3. Improved cash flow will raise financial flexibility, but with no material rating upside,
unless supported by conservative financial policy
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Revenue and margin growth and lower capex should strengthen cash flow and financial
flexibility for many operators. Credit impact will depend on financial policy and management
prioritization between deleveraging, accelerated investments, M&As, and shareholder returns.
Revenue gains will slow as inflation begins to subside, and we expect a faster rise in earnings on
margin growth. Led by the U.K., Belgium, Portugal, and the Nordics, service revenue trends have
broadly turned favorable in the past two years (see chart 12). This is thanks to contract-based
inflation indexation on post-paid subscriptions in several markets, ad-hoc increases in others,
and a reduction in promotional activity to lift the front book--that is, price plans for new
customers. We expect this will continue to support top-line revenue growth of slightly more than
1% on average for 2023-2025. Given our base-case assumption of a 3.4% nominal GDP growth in
2024 for the eurozone, telecom revenue growth will lag inflation and be negative in real terms.
Chart 12
European telcos' and cablecos' revenue growth lags GDP growth
f—Forecast. Source: S&P Global Ratings.
Growth rates are uneven across markets. Countries with intense competition and challenging
market structures will continue to see weaker-than-average telecom performance. Italy and
France, for example, have four-player markets with an aggressive price competitor. In both
cases, this entity is Iliad, whose Free brand has been gaining customer share at the expense of
existing players. In France, Iliad has been able to drive up its ARPU without raising prices by
migrating customers to its higher-end offer from its basic plan. This has limited price increases
among competitors, as they risk an increase in churn if they raise rates more aggressively.
The boost from contractual price increases and reduced promotional activity will dissipate in
the next two years. Our macroeconomic forecast for inflation of 2% by late 2025 means the
tailwind from automatic contractual price increases will subside in the next two years. This will
test telcos' ability to continue making gains from pricing. Meanwhile, we don't view the reduction
in promotional offers as an ongoing growth driver. Once the discount or the discount period is
reduced, the benefit is harvested and can't be reaped again in the same way that price increases
can. And, in our view, such reductions are more likely than price increases to reverse if
competition ramps up.
We expect a steady rise in margins despite lingering inflation. We expect European telcos to
realize modest profitability gains, pushing EBITDA margins up by about one percentage point
annually through 2025 (see chart 13). The fall in energy costs has boosted EBITDA, and a drop in
low-margin equipment sales has improved the revenue mix. Labor costs are moving front and
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2019 2020 2021 2022 2023f 2024f 2025f
(Growth)
Revenue growth year on year
Eurozone nominal GDP growth
year on year
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center in telcos' cost structures this year and in 2024, as measures of inflation (like the producer
price index and consumer price index) fall, while wage growth, still above 7%, remains higher.
Wages typically constitute 15%-20% of telcos' revenue, so a 5% increase in wages erodes margins
by about 1%. Wages are also stickier and unlikely to fall as energy costs have done over the past
year. We therefore forecast labor costs will counterbalance margin expansion. However, the
offsetting factors are the drop in energy prices; the effect of longstanding efficiency programs,
including workforce reductions, digitalization, and enhancement of sales channels and customer
service using artificial intelligence; and the growing shift to fiber networks, which have lower
operating costs than copper networks.
Chart 13
European telecoms average margins (% of sales)
f—Forecast. Source: S&P Global Ratings.
Chart 14
European telecoms average capex (% of sales)
f—Forecast. Source: S&P Global Ratings.
Capex will shrink to a sustainably lower level for the next few years, improving cash flow. After
remaining chronically elevated for a decade due to 4G rollouts and long-term densification, fiber,
and then 5G, capex has dropped sharply in 2023, averaging 17% of revenue, and will remain stable
at that level through to 2025, in our view (see chart 14). But the trend is uneven among markets.
The drop is mainly due to primary fiber rollouts nearing completion in large markets like Spain
and France, and to a lesser extent a slowdown in 5G spending after the peak of the initial rollouts
in many markets.
As operators decommission their copper networks, the lower maintenance capex associated with
passive fiber networks should allow them to reduce investments. We expect incumbents like
Orange S.A. will see capex intensity fall to 16% in 2023 and to 15% in 2025, and Telefonica S.A. to
14% and 12%, respectively. On the other hand, with fiber rollouts in the U.K. and Germany--two
markets that are significantly behind in fiber coverage--only now reaching full throttle, capex of
telcos there will remain above 20%. We forecast that British Telecommunications PLC will have a
24% capex intensity through to 2025. But in aggregate, the falling capex intensity is good news
for telcos' cash flows.
Improved cash flow will raise financial flexibility, but without material rating upside, unless
supported by conservative financial policy. The recent expansion in FOCF should continue,
more than doubling from the 2020 level by 2025 (see chart 15). This, along with EBITDA expansion,
should give telcos the financial flexibility to reduce leverage and increase the rating headroom
amid tighter funding conditions. However, companies are facing competing priorities, and the
35%
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36%
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40%
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2019 2020 2021 2022 2023f 2024f 2025f
Telcos EBITDA margin Cablecos EBITDA margin
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17%
17%
27%
25%
29%
27%
24%
25%
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2019 2020 2021 2022 2023f 2024f 2025f
Telcos capex Cablecos VF-adjusted capex
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credit impact will depend on financial policy and relative prioritization between deleveraging,
accelerated investment, M&As, and shareholder returns.
Chart 15
European telcos' consolidated operating cash flow breakdown
f—Forecast. Capex—Capital expenditure. Source: S&P Global Ratings.
Credit metrics and financial policy
Modest revenue, EBITDA, and FOCF gains will increase the headroom for ratings, but with the
exceptions of Swisscom, Cellnex, and United, we don't see metric improvement leading to
positive rating momentum.
With low growth prospects and equity values, operators have scant financial flexibility to
address their significant investment and shareholder return demands. Therefore, our analysis will
focus on financial policy and capital allocation decisions in the next two years that will be critical
as revenue growth could stall and high interest rates--which we expect to peak in 2024, but
remain elevated afterward--could re-base interest costs considerably higher if leverage levels
stay unchanged.
Given tighter funding conditions, we expect operators will continue to sell infrastructure assets.
Tower sales have improved financial flexibility for telcos needing to deleverage, or raise funds for
other uses, including investments and shareholder returns, even after lease liabilities that
operators have taken on to regain access to critical tower infrastructure.
Fixed-line assets may also be sold, and often take the form of joint ventures. The motivation here
has been to avoid the negative financial effects of fiber development. Deconsolidation can push
capex, debt, weak initial EBITDA, and cash flow associated with an expensive greenfield fiber
development off the balance sheet. However, if we think the deconsolidation may be temporary
and there's the potential for reconsolidation, we may employ a proportionate approach to reflect
the underlying reality--providing the distortion is material--and to avoid volatility in credit ratios
arising from potential future changes in the accounting scope.
GCC telcos are actively selling their assets, as well as reshuffling their corporate structures to
carve out such assets, particularly related to adjacent digital businesses, leaving the door open
for future monetization. Tower infrastructure is generally owned and operated by telcos in the
GCC region, with very limited independent tower operator presence. This trend may change in the
next few years. In late 2022, Saudi Telecom Company (STC) received a non-binding offer from
Public Investment Fund, the sovereign fund of Saudi Arabia, to acquire 51% in its fully owned
tower company Tawal, valuing its more than 15,500 towers at $5.8 billion. The sale is still pending
regulatory approvals. In December 2023, Ooredoo Q.P.S.C. concluded the agreement with Zain
0
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2019 2020 2021 2022 2023f 2024f 2025f
(Bil. €)
Telcos' free operating cash
flow
Telcos' capex
Telcos operating cash flow
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Group and TASC Towers Holding to create the largest tower company in the Middle East and
North Africa region with about 30,000 towers combined, valued at $2.2 billion. In both cases, we
expect STC and Ooredoo to deconsolidate their tower operations, given the less than 50%
ownership and lack of control.
GCC telcos are also developing non-telecom businesses, such as fintech, cyber security, cloud,
data centers, and many others. Their businesses were either carved out or established as stand-
alone entities, most recently by e&, Ooredoo, and Bahrain Telecommunications Company BSC.
We expect them to grow faster than the core telecom operations, and create meaningful
monetization opportunities in the future, as the GCC equity markets undergo a strong push for
broadening of investable assets base and see a high number of IPOs. STC pioneered this in 2020-
2021 by listing a 20% stake in its technology company, Solutions by STC, and selling a 15% stake in
its licensed digital bank, STC Pay.
Key risks or opportunities around the baseline
1. Rising prices and revenues may be short-lived, opening the door to renewed competition.
We see indirect risks if poor macroeconomic conditions reduce disposable income, or if
increased customer price sensitivity paves the way to aggressive price competition and higher
churn rates.
2. Prolonged high interest rates that constrain access to capital markets and weaken credit
ratios could punish speculative-grade issuers with more leveraged capital structures.
The sector's average debt maturity is long dated, but speculative-grade issuers with nearer-
term maturities face liquidity risks if capital market access tightens. For highly leveraged
issuers, for which FOCF and interest coverage are critical credit measures, higher interest
rates could strain credit ratios.
3. Transaction risks exist to both the upside and downside.
Market consolidation is an upside risk if it moderates competition and improves growth
prospects. Meanwhile, asset sales may weaken business profiles if strategic infrastructure is
monetized, though if multiples are high enough, proceeds could provide an offsetting
improvement in financial profiles.
Rising prices and revenues may be temporary, potentially reigniting competition, which
remains the primary risk for the sector. Recent revenue growth, stemming from price hikes,
have been digestible when inflation has raised the tide for prices on most products and services,
but we don't view this a reliable long-term driver. Consistent service revenue growth has been
challenging for the sector, and for Europe in particular, given high fragmentation and
competition. Despite increased data traffic, which required sustained levels of relatively high
operating expenditure and capex, operators haven't been able to reliably raise prices through
more-for-more offers, which has led to a long-term deterioration in return on capital (see chart
27 of Appendix). If rising prices no longer drive revenue growth, aggressive operators could turn
to price cuts to increase net adds and expand their market share.
Even if the revenue tailwinds from inflation persist, we think the price hikes could become
untenable. Pushing all the costs to customers with reduced budgets could backfire, leading to
consumer and regulatory pushback, and potentially increasing price competition by aggressive
challengers. In December 2023, the U.K.'s communications regulator Ofcom proposed a new rule
that would effectively ban inflation-based price indexation and require the disclosure of
contractual price increases. This would increase price transparency and certainty for
subscribers. Ofcom could finalize this rule in the Spring of 2024 and make it effective in the
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second half of the year. A backlash could also lead to government intervention and undermine
any regulatory appetite for in-market consolidation and lighter-touch wholesale regulation,
topics that have, or could have, relevance for several markets, including the U.K., Spain, and Italy.
A recession in Europe would ratchet up competition risks. We would expect an initial softening in
the enterprise customer base resulting from reduced headcount and project spending,
particularly among small- to medium-sized businesses. For retail consumers, steep drops in
disposable income may not result in mass cord-cutting, but it can increase consumer price
sensitivity. Customers looking for better value are more likely to churn, incentivizing low-price
competition by carriers. In such a scenario, markets that we view most at risk to a flareup in
competition include those with:
• An aggressive price challenger focused on growing to scale;
• A competitive market structure, typically four or more players, and a poor track record of
price improvement; and
• Weak barriers to churn, including a high prepaid customer base and a low degree of
convergence.
Prices and churn rates could improve in the medium term. Beyond inflation-linked price hikes,
we believe upside potential exists in the medium term. As leveraged challengers refinance their
capital structures at higher borrowing rates, greater debt service costs may widen cash flow
shortfalls and the timeframe to break even. Among the more aggressive price players, this could
force a strategic reconsideration of market exits or a shift to higher-margin, higher-ARPU
offerings to shorten the time to generate cash flow. For historically competitive markets, a
moderation of aggressive offers may allow prices to rise and churn rates to fall starting in 2026 as
more of the maturity wall comes current.
Speculative-grade issuers with more-leveraged capital structures could take a beating
from
prolonged high interest rates that constrain access to capital markets and weaken credit ratios.
Our first concern is for liquidity, and that speculative-grade issuers refinance opportunistically
and early to avoid a maturity-driven crunch. Fortunately, most 'B' rated issuers have pushed out
their maturity walls by several years during the period of ultra-low borrowing costs. With 90% of
maturities now falling in 2027 and beyond, the sector has sufficient breathing room to pursue
deleveraging or to refinance well in advance (see chart 16).
Chart 16
Heavily back-ended debt maturity profile buys issuers time
Single 'B' debt maturities
Source: S&P Global Ratings.
That said, debt will still mature, and our focus will be on the liquidity of issuers like Altice France
(€1.5 billion of maturities in 2025), TalkTalk ( €685 million in 2025), Tele Columbus (€600 million in
0
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20
2025), and Telecom Italia SpA if it does not complete the spin-off of its domestic fixed-networks
division NetCo from its retail division (€3.5 billion in 2024 and €2.0 billion in 2025). If debt
becomes current without a defined, credible plan to address liquidity needs in the next 12
months, we will consider downgrades, including to the 'CCC' category. We could also consider
taking such steps prior to the 12-month deadline if we anticipate substantial barriers to securing
adequate liquidity, or if we assess a company's capital structure as unsustainable.
In the longer term, interest coverage and FOCF metrics--the ratios we focus on when assessing
'B' rated issuers--will weaken if they refinance at higher interest rates. However, the heavily back-
ended maturity wall gives issuers time to improve their prospects, either through organic and
inorganic deleveraging, or through a faster-than-expected decline in interest rates. We're
therefore unlikely to reflect the impact of higher rates in our ratings until refinancings are more
proximate.
In the event that rates remain high and issuers are unable to deleverage their balance sheets
sufficiently, we have run stress tests to gauge the impact on interest coverage and FOCF-to-debt
ratios. Although the ratios erode, the magnitude is manageable for the majority of 'B' rated
issuers. For the next three years, we forecast an improvement that leaves the 2025 ratios as
good or better than what we expect for 2023, even under stresses of 50 and 150 basis point
increases in interest rates (see charts 17 and 18).
Chart 17
European telcos' average EBITDA interest coverage
Telcos rated in the 'B' category
bps—Basis points. Source: S&P Global Ratings.
Chart 18
European telcos' average free operating cash flow to debt
Telcos rated in the 'B' category
bps—Basis points. Source: S&P Global Ratings.
However, for selected issuers, the stress could become considerable in the short term. Tele
Columbus, for example, has already defaulted and is moving forward with a distressed exchange
to recapitalize. Altice France (B-/Stable/--) faces a wider FOCF shortfall and a further delay in
achieving breakeven levels. And TalkTalk (B-/Watch Neg/--) and Zacapa (B/Stable/--) are most
exposed to an erosion of interest coverage to below 2x.
Transaction risks exist to both the upside and downside. Market consolidation is an upside risk
if it moderates competition and improves growth prospects. Meanwhile, asset sales may weaken
business profiles if strategic infrastructure is sold, though if the proceeds are high enough, they
could provide an offsetting improvement in financial profiles.
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M&As. European operators have long sought market consolidation to relieve competitive
pressure, the key risk to telcos' credit quality, in our view. Regulators have effectively denied
market consolidation for most of the past decade, with the exception of the Netherlands (a
smaller market) and Italy, where steep remedies required a new and ultimately destabilizing
entrant (Iliad). We view the proposed transactions in Spain and the U.K. as a test of the balance
regulators are willing to strike between incentivizing investment and protecting consumers. In our
opinion, the potential for approval is relatively high in Spain but will require remedies. The
consolidation won't reduce infrastructure competition since it brings together MasMovil Ibercom
S.A.'s asset-light entity with Orange Spain's integrated asset model. We also view the reduction in
competition to be relatively modest since the incumbent is not involved and MasMovil is not a
purely price-driven challenger in the market. We also expect Digi Communications N.V. will
receive remedies that will allow it to scale up to shift to a mobile network operator from a mobile
virtual network operator, potentially addressing consumer protection concerns. The key question
is how strong a remedy package regulators will require, and whether it scuttles the deal, or
cancels out the market benefits, as we saw in Italy.
In the GCC, after a few years of relative calm, telcos have resumed acquisitions. In 2023, STC's
tower company Tawal acquired tower assets in Bulgaria, Croatia, and Slovenia from United Group
for €1.22 billion. STC generates about 92% of revenue from its domestic market in Saudi Arabia,
so expanding its geographic footprint is one if its objectives. Also, e& was very active in 2023,
pursuing external growth in several markets. It announced the acquisition of a majority stake in
PPF Telecom (excluding the Czech Republic operations) for €2.15 billion in Europe, its subsidiary
PTCL made an offer to acquire Telenor business in Pakistan, while its $2.12 billion offer to gain a
controlling stake in its 28% associate Mobily in Saudi Arabia is still pending regulatory approvals.
GCC telcos deploy their capital in external growth initiatives, because their mature domestic
telecom markets offer limited growth prospects. Their international subsidiaries in less mature
markets demonstrate faster growth but are hampered by unfavorable currency movements.
Stable regulatory frameworks and currencies in Europe offer an attractive investment
opportunity for financially solid GCC telcos, which we believe will continue to expand in new
markets.
Infrastructure asset sales.
Telcos have steadily sold off assets since the mid-2010s, starting with
mobile tower portfolios. More recently, asset sales have transitioned to fixed-network sales, fiber
assets in particular, and we see risks of an adverse business impact, depending on whether the
sold assets are unique and how extensive they are. For example, we view an incumbent's sale of
all its fixed-network assets as likely to stress its business profile, with the downward revision in
our assessment of it likely to be about one notch. The impact could be less if a challenger telco
sells off its network; if the network is overbuilt by competitors and not a unique, differentiating
asset; or if the operator retains other differentiating assets in the market or has diversified
exposure to other markets.
To date, we have only two rated examples of a fixed-network spin-off and its business impact on
the telco. One is an integrated telco Telcom New Zealand Ltd., renamed Spark New Zealand Ltd.
after it split off its fixed network, which was named Chorus. The split led to a downgrade of Spark
to 'A-' and a one-notch downward revision of its business risk profile to satisfactory. The other
example is TDC, renamed Nuuday after it split off its fixed network, which was named TDC Net.
The split led to a one-notch downward revision of Nuuday's business risk profile to fair from
satisfactory.
We placed the rating on Telecom Italia on CreditWatch with positive implications while the
announced sale of its fixed-line network to private-equity firm KKR awaits approval and
completion. The potential deleveraging to 3.5x-4.0x could result in an upgrade to 'BB' or 'BB-'.
This would also indicate a weakening of the business risk profile, similar to the case of Nuuday.
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Industry Outlook: LatAm
Ratings trends and outlook
We expect generally stable ratings for LatAm operators, although about 20% of the rated issuers
have a negative outlook, given weaker credit metrics due to persistently high competition, and
higher inflation and operating costs. On the other hand, issuers with stable outlooks account for
about 60% of the region's rated industry entities thanks to robust demand for data usage,
operating efficiencies, and strong balance sheets that provide the leverage headroom to absorb
weaker economic conditions. Positive outlooks mainly reflect a similar rating action on the
sovereign rating on Brazil. We also continue to view growth prospects for tower companies in the
region as favorable, as under-penetration remains a driver for the expansion of their respective
networks, compared to more developed regions.
Main assumptions about 2024 and beyond
1. Modest revenue growth and limited profitability.
We expect revenues to remain moderate, in line with our forecast for a low trend for GDP
growth across LatAm in 2024.
2. No major regulatory changes expected.
We don't anticipate regulatory risks related to spectrum license cancellations or paused
renewals that would impede technological advances in the industry.
3. Divestments of fiber and tower assets continue.
Carriers have taken strategic initiatives to accelerate growth, and some of them have spun off
their fiber and tower businesses mainly to reduce capex and leverage.
Modest revenue growth and limited profitability.
Overall, we anticipate moderate growth among
LatAm operators. We expect the industry growth to be in low-single digits for 2024, reflecting a
similar economic growth trend for the region. On the one hand, we believe revenue growth for
smaller players will be low as operators maintain promotional packages to regain market share,
denting ARPUs as well as operating margins that have been below 20%. On the other hand, we
expect larger players in Brazil and Mexico--Telefonica, Algar Telecom S.A., and America Movil
S.A.B. de C.V.--will continue to grow. These companies are focusing on bundled products,
including mobile and broadband (fiber) and increasing value-added services, taking advantage of
the realized investments for the 5G spectrum. As a result, we expect steady revenue growth as
demand for data services increases, coupled with strong operating performance and EBITDA
margins above 30%.
No major regulatory changes in 2024.
Although carriers are subject to extensive government
regulation and could stress their operations, we don't anticipate significant changes in this
regard. Actually, governments in the region are contributing to the industry's growth by not
restricting spectrum bids and limiting the rises in taxes on the industry.
In Chile, Brazil, and Colombia, there are no relevant changes on the regulatory front. Yet in
Mexico, the Federal Telecommunications Institute (the industry regulator) is currently working on
its biannual revision of the asymmetric regulation applied to America Movil in 2013, to determine
if sufficient competition in the telecom sector exists. Although we don't expect any additional
measures or changes, we will closely monitor the result of this revision and its impact on the
company's business and financial performance.
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January 9, 2024
23
Divestments of fiber and tower assets continue. LatAm companies have been moving toward
the separation between services and infrastructure services, reducing the investment burden
stemming from constant network upgrades. Telefonica and Claro S.A. have sold these assets to
develop targeted financial plans and capital allocation to foster growth and strengthen their
competitive positions. America Movil (Claro) already completed the spin-off of all of its tower
companies in LatinAm, creating two new companies--Operadora de Sites Mexicanos S.A.B. de
C.V. and Sitios Latinoamerica S.A.B. de C.V. During 2023 the spin-off of the towers business in
Austria Telekom, one of its subsidiaries, was also completed. Additionally, Telefonica (Coltel)
received cash for its infrastructure assets in Colombia, Peru, and Chile. These transactions have
helped companies reduce debt obligations and strengthen their financial position, but the
proceeds also have a significant impact on reducing capital investments requirements going
forward.
Credit metrics and financial policy
For Chilean and Colombian operators, we expect EBITDA margins to remain below the industry
average, resulting from significant competition and weak operating performance taking a toll on
leverage metrics and liquidity. We also anticipate cash flow will remain pressured due to high
capital requirements to continue increasing network capacity and quality to improve customer
loyalty. Likewise, we expect to see lower dividend payments and some capital contributions in
attempts to strengthen balance sheets.
However, we expect the leading players will continue with the deployment of 5G technology. We
also expect companies will continue to focus on coverage to enhance their value-added services
to boost data usage and revenue growth, minimizing leverage concerns.
We believe tower companies' profitability will benefit from high cash-flow predictability, while the
substitution risk remains low, in line with built-to-suit sites, price inflation-linked escalators, and
an overall long-term average maturity of contracts. While the expansion will continue to require
sizable investments, we expect companies to continue to access bank and market debt funding
as their optimal capital structures allow for relatively higher leverage than for other subsectors
within the telecom industry. At the same time, this should allow companies to continue to benefit
from inorganic growth if opportunities from carrier spin-offs or market consolidation materialize
in the short to medium term.
In Brazil, we expect M&As to increase in 2024 as interest rates fall and demand for broadband
services start to rise again. During 2023, Vero S.A. and Americanet ltda. (Brazilian internet
services providers [ISPs]) announced a business combination, creating the country's second-
largest independent ISP.
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
24
Chart 19
Debt to EBITDA (average, adjusted)
a—Actual. f—Forecast. Source: S&P Global Ratings.
Key risks or opportunities around the baseline
1. Competition remains stiff.
The entrance of new carriers with aggressive price strategies continues to increase
competition, creating market destabilization in some LatAm countries.
2. Intense capital needs to develop new technologies.
Companies will need to increase their investments to continue increasing network capacity
and quality and to improve customer loyalty.
3. High interest rates and inflation could weigh on telecom companies.
Telcos are struggling with the currently tough macroeconomic conditions, making it difficult to
maintain high EBITDA margins.
Competition remains a risk. Chile and Colombia are good examples of highly competitive
environment following the entrance of Wom S.A., which seeks to become a large player in those
markets. This has resulted in increasing customer churn and weakening in ARPUs. Most carriers
still want to keep low service prices to maintain market share; however, this could dent
profitability and cash flow, leading to higher leverage and delays in the improvement of credit
metrics. Meanwhile, VTR Finance N.V. has experienced a sharp deterioration of its brand and
customer satisfaction, and a drop in subscribers, revenue, EBITDA, and cash flow as a result of
intense operating pressures and competition from its peers with better fiber option networks.
Also, the persistently high competition in the Chilean market, coupled with weaker
macroeconomic conditions, has eroded Telefonica Moviles Chile S.A.'s ARPUs and margins,
weakening profitability and leverage metrics.
Investments will increase for the 5G deployment (see chart 20).
In order to maintain low churn
rates and good market positions, LatAm carriers focus on raising the quality of their networks by
increasing coverage, quality, and speed of services. We have seen greater focus on investments
in the FTTH deployment and in the 5G technology. However, most governments in the region have
been focusing on getting coverage to areas that still don't have access to telecom services, as
well as completing the transition from copper to fiber. These priorities have delayed the 5G
spectrum license bids and haven't contributed to the investments needed for 5G infrastructure
assets.
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
2020a 2021a 2022a 2023f 2024f 2025f
(Debt to EBITDA)
Global
LatAm
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In Brazil, ISPs are still implementing the 5G coverage. Brisanet Servicos De Telecomunicacoes
Ltda and Unifique Telecomunicações S.A. have started to offer these services by using capacity
at their existing towers.
Chart 20
Capex growth in LatAm
a—Actual. f—Forecast. Source: S&P Global Ratings.
High interest rates and inflation could dent telcos' performance. They have already taken a toll
on profitability, cash flow, and leverage metrics of the main operators. Companies have
compensated for these effects by delaying investments, aggressive reductions in operating
costs, or taking on additional debt.
In Chile, higher costs of capital pushed telcos to sell fiber assets and lease them back, which
comes at the expense of weaker profitability. We expect more asset sales to come during the
next few months, which would provide a temporary relief to liquidity but would stress margins, so
we expect operators to work on their cost structures to diminish the burden.
-20
-15
-10
-5
0
5
10
15
20
25
0
100
200
300
400
500
600
700
800
900
2020a 2021a 2022a 2023f 2024f 2025f
(%)
(Mil. $)
Capex (left scale)
Year-on-year growth (right
scale)
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26
Industry Outlook: APAC
Ratings trends and outlook
Telcos navigate cost pressure and limited returns from 5G investments. Our base-case
scenario assumes a moderate earnings growth, spurred largely by increasing mobile data traffic.
In some South and Southeast Asian markets, where there's saturation in the mobile market and
high price sensitivity, we see fixed broadband as a bright spot in telcos' earnings as adoption
grows. Uptake rates of 5G in many APAC markets remain too low to boost overall ARPU, while
rising labor and electricity costs threaten to squeeze margins. Cost-cutting initiatives are
therefore a common theme among APAC telcos to preserve margins.
The net rating bias for APAC telcos is now mildly negative. This is an improvement from a
negative bias of over 30% around 2019 and 2020. Divestment-driven deleveraging underpins this
improvement. For example, we upgraded Voyage Digital (NZ) Ltd. in 2023 given its debt reduction,
which was made possible by its telecom tower sale. Similar actions by other telcos, while not
having resulted in positive rating actions, increased their rating cushion. We believe such
divestments are driven by the need to create balance-sheet capacity for incremental 5G
investments and for building new revenue streams further from traditional telco services to
boost long-term earnings potential. We expect such divestments to continue, and that telcos will
move from selling towers to other passive infrastructure and non-core assets.
Negative rating actions, if any, will likely be driven by idiosyncratic factors. The first wave of 5G
capex is over for APAC telcos, easing pressure on balance sheets. But as returns from such
investments remain limited, telcos may explore M&As to accelerate growth, gain market share,
and reduce competitive pressures. Such transactions, if debt-funded, can weaken credit quality.
Sporadic and expensive 5G spectrum auctions could also raise leverage stress.
On the earnings front, telcos with exposure to emerging markets may experience squeeze from
currency depreciation. This is especially prevalent among South and Southeast Asia telcos.
Main assumptions about 2024 and beyond
1. Moderately rising earnings as telcos navigate cost pressures.
EBITDA of APAC telcos will, on average, rise by a mid-single digits starting in 2024 thanks to
increased mobile data traffic and fixed broadband adoption. Telcos are adopting cost-cutting
initiatives and simplifying business structures to mitigate the impact of higher electricity and
labor costs on margins.
2. Capex intensity should ease as telcos continue 5G investments cautiously.
While 5G investments are necessary for competitive parity, telcos will focus network spending
on pockets with higher demand to maximize returns. We expect the average capex intensity
(average of telcos’ capex-to-revenue ratios) to be 21% in 2024, down from an estimated 23% in
2023.
3. Telcos will divest to invest.
While telecom tower sales were in vogue in the past 36 months, we believe telcos will move to
selling other infrastructure and non-core assets. There's also some initial momentum in
bringing in strategic partners for new growth engines.
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January 9, 2024
27
Earnings will rise moderately, benefiting from rising connectivity demand and cost-cutting
measures. Demand for faster and more data will spur upgrades to higher-priced mobile rate
plans. This could be for migration to more advanced networks for faster speeds, or for more data
allowances.
Our base-case scenario shows a divergence in the extent of earnings growth that we expect. We
forecast earnings of telcos in more mature markets such as Korea, Japan, and New Zealand to
increase by a low-single digits. In contrast, projected earnings growth for telcos in less mature
markets, particularly in South and Southeast Asia (SSEA), generally lean toward the mid- to high-
single digit range. On average, we expect EBITDA of APAC telcos will be up by mid-single digits in
2024 (see chart 21).
Chart 21
APAC telcos' EBITDA to rise by mid-single digit annually on average
Note: Excluded Axiata Group Bhd., Advanced Info Service Public Co. Ltd., Voyage Australia Pty. Ltd., and Voyage Digital (NZ)
Ltd. due to merger and acquisition activities. f—Forecast. Source: S&P Global Ratings.
The rising uptake of fixed-line broadband will remain a bright spot for several APAC markets.
Fixed-line broadband is growing rapidly in markets such as Thailand and the Philippines, where
the penetration rate remains low with about half or less of households having such connections.
ARPU and earnings will benefit from 5G services, even though not all telcos are charging a
premium for 5G services. Data use typically rises with migration to 5G, even though the use of 5G
service in and of itself doesn't consume more data. But it enables more data-heavy options, such
as superior video streaming. This better user experience could, in turn, encourage more
consumption and drive upgrades to higher-priced plans that offer more data. That said, more
obvious benefits of the 5G migration could take longer to observe, as adoption rates remain too
low to boost overall ARPU substantially. The effects may also be masked by an ongoing decline in
ARPU that we have observed in many APAC markets.
The viability of fixed-wireless broadband as an alternative to fixed-line broadband is raised by 5G.
This can boost earnings of telcos in markets such as Australia and New Zealand, as fixed-wireless
broadband allows them to bypass low-margin reselling of national fixed-broadband networks.
The rated tower companies in India and Indonesia should benefit from demand for more towers
and colocation to accommodate rising data traffic. A denser tower network is especially needed
for telcos that adopt stand-alone 5G. This is to compensate for the weaker penetrative ability of
the high-band 5G signals used.
APAC telcos must navigate inflation-linked rising costs, with little ability to pass them on to
consumers. This is because it is rare for prices of mobile plans in APAC to be linked to the CPI,
unlike in markets such as northern Europe. Among APAC telco markets that we analyze, we only
(2)
0
2
4
6
8
10
2021 2022 2023f 2024f 2025f
(%)
Average SSEA EBITDA growth
Average APAC EBITDA growth
Industry Credit Outlook 2024: Telecoms
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28
see CPI-linked mobile plans in Australia. Cost-cutting measures are thus commonplace and will
blunt the fallout from higher costs.
Average capex intensity should ease as telcos continue 5G investments cautiously (see chart
22). The first wave of high 5G spending has passed among the rated APAC telcos, with Bharti
Airtel Ltd. as among the last ones to roll out 5G networks since late 2022. APAC telcos have found
it difficult to resist investing in 5G despite limited monetizable opportunities. They need to offer
5G, even for limited consumer use cases, to retain competitive parity at least.
We expect telcos to improve their 5G network quality based on adoption rates and the success of
5G industrial use cases. This could mean strengthening 5G coverage in dense cities and central
business districts, ahead of less populated areas.
At the same time, investments to enhance fiber networks in several APAC markets have also
slowed. For example, the Philippines-based PLDT Inc. completed its copper-to-fiber migration in
2023, while New Zealand-based Chorus Ltd. completed it in 2022.
As a result, we project the average capex-to-revenue ratio for rated APAC telcos to ease to 20%-
21% in 2024 and 2025 from an estimated 23% in 2023.
Chart 22
APAC telcos' capex intensity to further ease
Average capex-to-revenue ratio
Note: Excluded Summit Digitel Infrastructure Ltd. because of its exceptionally high capex intensity at inception in 2019.
f—Forecast. Source: S&P Global Ratings.
Telcos will sell non-core and passive assets to create balance-sheet capacity. Transactions
involving APAC telcos selling tower assets should slow, after a spate of them in the past 36
months. Such transactions have increased telcos' financial flexibility. We believe telcos will move
toward divesting other business and infrastructure assets. We see early signs of this as some
telcos restructure their businesses, which could facilitate subsequent divestments. Proceeds
from selling assets that are not key to the telcos' competitiveness can create funding capacity
for capex and investments in new growth engines.
APAC telcos will be strategic about their ownership of assets, in our view. For investments not
central to their competitive advantage, we expect telcos will sell them entirely or in part. For
example, Singapore Telecommunications Ltd. announced its intention in May 2023 to undertake
S$6 billion of capital recycling in the medium term. Thus far, this has included a partial
divestment of the building that houses its headquarters, as well as the sale of its cyber-security
arm.
0
5
10
15
20
25
30
2018 2019 2020 2021 2022 2023f 2024f 2025f
(%)
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
29
Hong Kong Telecommunications (HKT) Ltd. and its parent PCCW Ltd. have also been divesting
businesses since 2021. This includes data centers in December 2021, a majority stake of PCCW's
solutions business in August 2022, and a significant minority stake in its video-streaming
business in June 2023.
Some partial divestments will be to strategic partners, particularly for new growth engines in
areas further from telcos' core connectivity business, where telcos may bring in partners to
reduce exposure to execution risks. Such partial divestments can also reduce the strain on
leverage.
Telcos will be more hesitant to sell active infrastructure assets. In our view, this may be
because such assets can help telcos capture the demand and earnings potential from growing
adoption of cloud services and artificial intelligence. For example, Australia-based Telstra Group
Ltd. publicly stated in August 2023 its intention to retain ownership of its infrastructure arm
InfraCo Fixed for the medium term. This announcement came less than a year after Telstra
completed the structural separation of its businesses into discrete units, intended to provide
more flexibility to explore growth and monetization options.
If telcos were to sell active infrastructure assets, it could weigh on their business strength. In our
view, such assets could confer competitive advantage on telcos, especially if they're extensive or
unique to the telco. In determining the implications for the telcos' credit profiles, we will
consider, among other factors, the extent to which the assets drive their competitive advantage,
the level of control retained in these assets, and any change to leverage.
Credit metrics and financial policy
Upward rating momentum is unlikely despite a moderate rise in earnings. While we expect
earnings to rise by mid-single digits on average, metric improvement will be incremental at best.
We estimate the average debt-to-EBITDA ratio of APAC telcos to be 2.6x-2.7x in 2024 and 2025,
compared with an estimated 2.8x in 2023 (see chart 23). That's because continued investments in
5G and new growth engines will use up balance-sheet capacity.
Chart 23
APAC telcos' leverage to remain largely stable
Note: Excluded Nippon Telegraph and Telephone Corp., PT. Profesional Telekomunikasi Indonesia, Summit Digitel
Infrastructure Ltd., and Voyage Digital (NZ) Ltd. due to acquisition-led debt increases or high inception leverage.
f—Forecast. Source: S&P Global Ratings.
APAC telcos should tolerate higher interest rates well. The predominantly investment-grade
nature of the rated APAC telcos has meant that the heightened interest-rates haven't eroded
2.4
2.5
2.6
2.7
2.8
2.9
3.0
0
1,000
2,000
3,000
4,000
5,000
6,000
2018 2019 2020 2021 2022 2023f 2024f 2025f
(x)
(Mil. $)
Average debt (left scale)
Average EBITDA (left scale)
Average debt-to-EBITDA ratio
(right scale)
Industry Credit Outlook 2024: Telecoms
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credit metrics. Most APAC telcos have well-distributed debt maturities and a sizable proportion
of fixed-rate debt. In addition, some telcos like China Mobile Ltd. and Taiwan-based Chunghwa
Telecom Co. Ltd. have no debt on a net basis. Persistently low interest rates in Japan also benefit
the domestic telcos, at least with regard to their borrowing costs.
Leverage management remains crucial. With investments in 5G and new growth engines
continuing, while returns lag, telcos must work harder to keep their balance sheets lean. With the
rated APAC telcos mostly at investment grade, the focus is on financial policy. We believe that
timely asset divestments to cope with ongoing capex will be the key tool telcos will use to
preserve their credit metrics.
Key risks or opportunities around the baseline
1. Competition, prolonged inflation, and currency risks could weigh on earnings.
Operators in markets with new entrants could adopt more cautious pricing. Prolonged
inflationary pressures could result in slower upgrades to higher-priced plans and new 5G-
enabled handsets. This, coupled with cost pressures, could be a drag on margins. Telcos with
exposure to emerging markets with weakened currencies could face slimmer earnings.
2. A need for more capex.
Telcos that have rolled out non-stand-alone 5G may face another investment wave as they
move toward stand-alone 5G. Sporadic spectrum buys could also exacerbate leverage stress.
3. Rising investments in new growth engines could raise the earnings potential, but also
leverage.
APAC telcos have been investing in new growth engines, particularly in data centers, to boost
growth. Such investments, if debt-funded, can erode the rating headroom. Execution risks
could also lead to higher-than-expected capital intensity.
Competition and macroeconomic factors could limit earnings upside. Consolidation (both
ongoing and concluded) in markets such as Thailand, Indonesia, Malaysia, and Taiwan will likely
result in stronger players, more rational pricing, and lower the risk of a new player entering into
the market. In contrast, operators in markets with new entrants, such as in the Philippines, or
those with growing mobile network operators, such as in Korea, could adopt more cautious
pricing.
Prolonged inflationary pressure, other than weighing on telcos' cost structures, can also weaken
consumer sentiment. This could result in slower upgrades to higher-priced plans and lengthen
handset replacement cycles, especially in price-sensitive and predominantly prepaid markets.
Telcos such as Axiata Group Bhd. and Bharti Airtel Ltd. are more exposed than others to
currency-depreciation risks. This is given their exposure to emerging markets such as Sri Lanka
and Africa, where domestic currencies have weakened substantially. In addition, regulatory risks
are higher in emerging markets. We believe high regulatory risks contributed to Axiata's exit from
its Nepalese telco operations, which it announced in December 2023.
Capex risks diverge for APAC telcos. This is because the scale of costs for 5G spectrums is wide,
ranging from no upfront fees for telcos in countries such as China and the Philippines, to more
than US$5 billion for telcos in India. Sporadic spectrum auctions in countries where spectrum
licenses are expensive, such as in Taiwan, Thailand, and India, pose as an event risk. This is
especially so when the timing of such auctions remains uncertain.
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Another wave of 5G spending could also come for telcos that have adopted the non-stand-alone
5G model, as they move toward a stand-alone model eventually. We believe that most, if not all,
operators will do so to capture more meaningful monetization benefits. Stand-alone 5G can
provide faster speeds, much lower latency, as well as the ability to slice networks. Network
slicing is imperative to tailor networks to the needs of consumers and businesses in industrial-
use cases.
Investments in new growth engines could weigh on leverage due to lag in payback. APAC
telcos' investments into new growth engines have been on a rise, in a bid to boost the long-term
earnings potential. Such investments, if debt-funded, can diminish the rating headroom, because
these new revenue streams take time to ramp up.
As telcos move away from the traditional core-connectivity business, they may lack the know-
how and execution risks could arise.
Related Research
• Credit FAQ: What's On European Telecoms Investors' Minds?, Dec. 14, 2023
• Price Dynamics And Ability To Invest In New Technology Will Determine The Path Ahead For
Latin American Telecom Companies, Oct. 5, 2023
• Credit FAQ: The Evolving Landscape Facing U.S. Cable Operators, Sept. 26, 2023
• Credit FAQ: Intense Competition And Investments Eat Into Chilean Telecom Operators’
Metrics Amid Efforts To Bolster Returns, Aug. 11, 2023
• Asia-Pacific 5G: Telcos Face A Billion-Dollar Balancing Act, July 24, 2023
• Credit FAQ: U.S. Telecoms Face New Credit Risks From Old Cables, July 19, 2023
Industry Credit Outlook 2024: Telecoms
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January 9, 2024
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Industry Forecasts
Telecoms - Fixed and Wireless Cable and Satellite
Chart 24
Chart 25
a) Revenue growth (local currency)
a) Revenue growth (local currency)
b) EBITDA margin (adjusted)
b) EBITDA margin (adjusted)
c) Debt / EBITDA (median, adjusted)
c) Debt / EBITDA (median, adjusted)
d) FFO / Debt (median, adjusted)
d) FFO / Debt (median, adjusted)
Source:
S&P Global Ratings. f = Forecast.
Revenue growth shows
local currency growth weighted by prior-year common-currency revenue share. All other figures are converted into U.S. dollars using historic
exchange rates. Forecasts are converted at the last financial year-end spot rate. FFO—Funds from operations.
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
2020 2021 2022 2023f 2024f 2025f
N.America Europe Asia-Pacific
Latin America Global
-2%
0%
2%
4%
6%
8%
10%
2020 2021 2022 2023f 2024f 2025f
Global Cable & Satellite
0%
10%
20%
30%
40%
50%
2020 2021 2022 2023f 2024f 2025f
N.America Europe Asia-Pacific
Latin America Global
0%
10%
20%
30%
40%
50%
2020 2021 2022 2023f 2024f 2025f
Global Cable & Satellite
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2020 2021 2022 2023f 2024f 2025f
N.America Europe Asia-Pacific
Latin America Global
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
2020 2021 2022 2023f 2024f 2025f
Global Cable & Satellite
0%
5%
10%
15%
20%
25%
30%
35%
40%
2020 2021 2022 2023f 2024f 2025f
N.America Europe Asia-Pacific
Latin America Global
0%
5%
10%
15%
20%
2020 2021 2022 2023f 2024f 2025f
Global Cable & Satellite
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33
Cash, Debt, And Returns: Telecoms
Chart 26
Chart 27
Cash flow and primary uses
Return on capital employed
Chart 28
Chart 29
Fixed- versus variable-rate exposure
Long-term debt term structure
Chart 30
Chart 31
Cash and equivalents / Total assets
Total debt / Total assets
Source: S&P Capital IQ, S&P Global Ratings calculations. Most recent (2023) figures use the last 12 months’ data.
-100
0
100
200
300
400
500
600
2008 2010 2012 2014 2016 2018 2020 2022
$ Bn
Capex Dividends
Net Acquisitions Share Buybacks
Operating CF
0
1
2
3
4
5
6
7
8
9
2008 2010 2012 2014 2016 2018 2020 2022
Global Telecommunication Services - Return On Capital (%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2010 2012 2014 2016 2018 2020 2022
Variable Rate Debt (% of Identifiable Total)
Fixed Rate Debt (% of Identifiable Total)
0
50
100
150
200
0
500
1,000
1,500
2,000
2008 2010 2012 2014 2016 2018 2020 2022
LT Debt Due 1 Yr LT Debt Due 2 Yr
LT Debt Due 3 Yr LT Debt Due 4 Yr
LT Debt Due 5 Yr LT Debt Due 5+ Yr
Val. Due In 1 Yr [RHS]
$ Bn
0
2
4
6
8
10
12
2008 2010 2012 2014 2016 2018 2020 2022
Global Telecommunication Services - Cash & Equivalents/Total
Assets (%)
0
5
10
15
20
25
30
35
40
45
50
2008 2010 2012 2014 2016 2018 2020 2022
Global Telecommunication Services - Total Debt / Total Assets
(%)
Industry Credit Outlook 2024: Telecoms
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