Consumer spending trends, demand for connectivity and better macroeconomic conditions support a stable outlook for EMEA telcos, according to Moody's research. The industry is expected to sustain revenue growth of just above 1%, slightly lower than the 1%-2% expected by Moody's last year.
As the boundaries between cable and telecom companies continue to fade, the importance of offering converged services through bundles will increase, while product differentiation will become more relevant. However, Moody's rules out any large cross-border deals amongst incumbents or acquisition of content producers by telecom service providers.
Asset sales will continue to be on the agenda. It might be noted here that recently, Zain entered into definite agreements to sell and leaseback the passive physical infrastructure of its mobile tower portfolio in Kuwait for $165 million to IHS. Spectrum auctions will lead to further use of financial flexibility.
Revenue growth in commodity-driven markets will improve, albeit gradually, following improvement in economies such as Saudi Arabia, Kuwait, Oman, the United Arab Emirates, Nigeria, South Africa and Zambia. EBITDA margins will remain stable but will be susceptible to volatility of local currencies relative to the dollar. Growing demand for data is expected to contribute to revenue growth for the telcos across all these markets.
Many of the telcos in the region will also be required to make investments to expand their fibre infrastructure. Regulators have a significant role to play since delay in the allocation of new spectrum hurts the rollout of data strategies for MNOs.