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[March 27, 2014]
Moody's assigns credit positive to Gulf telecom operators [Gulf News (United Arab Emirates)]
(Gulf News (United Arab Emirates) Via Acquire Media NewsEdge) Dubai: Moody's has given a credit positive to Gulf telecom operators who have signed deals to share their mobile networks.
On March 18, Etisalat (Aa3 stable) signed a memorandum of understanding with six other mobile telephony companies active in the Middle East and Africa - among them Ooredoo (A2 stable) and Saudi Telecom Company (STC, A1 stable).
"The pact is credit positive because the telecom operators within Gulf Cooperation Council (GCC) countries - Etisalat, Ooredoo and STC - will benefit from lower operating costs and more efficient uses of capital owing to the infrastructure-sharing agreement. Reduced costs will help operating profitability, which has been declining for a number of years," Martin Kohlhase, vice-president - Senior Analyst at Moody's, said in the Moody's Credit Outlook, a biweekly newsletter.
He added that the three operators' capital expenditures have been high compared with group sales and relative to European telcos, averaging 21 per cent in 2013, up from 17 per cent in 2012 and 2011, which is more in line with the average for European telecom operators.
A reduction of the capex to sales ratio closer to European averages of around 17 per cent would result in combined annual savings for the three GCC operators of approximately $1.3 billion (Dh4.8 billion), or around 20 per cent of the average 2013 capital expenditures, the report said.
Apart from network sharing, Kohlhase said that many GCC telcos individually have already taken other steps such as outsourcing, reducing headcount, sharing best practices across their operations and centralising procurement to offset negative pressure on profitability.
Some of these measures have slowed their profitability margin erosion, he said but added that the network-sharing pact is evidence that incumbent GCC telecom operators continue to implement mitigating actions.
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