Investors looking for a refuge from the global credit storm might consider telecommunications companies in the Asia Pacific region — minus Japan, of course.
Though negative pressures from the global economic recession could build during the coming year, Moody’s Investors Service still sees ample cash flow overriding the negatives, and has a “stable” outlook for the sector.
Compared to other regions, a disproportionately higher number of rated Asia Pacific telecom operators are investment grade. Liquidity for these investment grade issuers..tends to be relatively strong, as reflected by high cash balances and consistent cash flows, well-laddered debt maturities and manageable debt-servicing requirements.
The region will not be immune to the credit crisis and global recession, Moody’s says, with funding getting more expensive and households having less discretionary income. But the ratings agency expects that, just as happened in Japan during the “lost decade” of the 1990s, households will still spend on telecom.
For example, Moody’s says that despite slowing economies in Australia and Hong Kong, consumers so far are not putting off cell phone upgrades. The local servicers, Telstra Corp.(OTCPK:TLSYY), PCCW Ltd (PCW) and City Telecom Ltd (CTEL), are still generating healthy growth.
For details, see “Snapshot: Asia Pacific (ex-Japan) Telecommunications Sector.”