the rater Moody’s Investors Service raised his expectations for the telecommunications sector in Latin Americaby placing that industry in a position of “stability” for the next two years and from a previous position in which it only warned of a “positive” outlook for the companies in the sector in the region.
Factors such as older EBITDAoperating efficiencies and the consolidation of brands through mergers and acquisitions, plus annual investments, will result in the generation of a continuous flow of resources in 2022 and 2023 that will allow the industry to maintain and extend coverage, in addition to thinking about other services for the consumer.
In 2022, inflation and a fierce competition of packages offered in the market will still impact the operators’ income.
In Mexico, the inflation forecast for 2022 stood at 5.76% at the beginning of the year, but the tax authority and the Bank of Mexico now they project an inflation of 6.10% for the whole year. For Latin America as a region, inflation will be 11.2% in the year.
Despite inflation, continued and rising mobile data consumption will see revenue rise steadily in the year as well, Moody’s said.
The report Global Internet Research Service TeleGeography indicates that mobile data consumption increased by 59% in Latin America during 2020. In Mexico, in 2021, a postpaid user consumed an average of five gigabytes of mobile data per month.
“Strong growth in data consumption continues to benefit Latin American telcos and revenues will return to growth in 2023 as consumers demand faster data networks and existing infrastructure is ready to absorb increased demand,” Moody’s said.
“Telecommunications companies’ Ebitda and absolute Ebitda margins will increase during this period as they continue to capitalize on the efficiencies they gained in 2020 during the lockdown. And as we enter 2023, some companies will also reap the benefits of mergers and acquisitions executed even before the pandemic (…) The asset minimization model increasingly common in the Latin American telecommunications sector, with companies that they sell towers and other types of passive infrastructure, it only has limited implications for the credit quality of the companies”, the firm explained.
In 2022 and 2023, capex will be more stable for Latin American telcos than in previous years, at 19.5% of revenues or about $14.7 billion annually, according to Moody’s.
The capital expenditures/revenue ratio for the 2022-2023 period will be higher than the 17.3% average for the 2017-2020 period and the absolute amount of capital expenditures will be slightly lower than the investments of 15,000 million dollars made in 2019 , before the pandemic began.