Fitch: LatAm Telecom Faces Negative Outlook for 2017 on Mature Market and High Competition

The 2017 rating and sector outlooks for Latin American telecommunications have shifted from stable to negative, with any material improvement unlikely in 2017 as negative trends prevail, according a new Fitch Ratings report.

"Negative factors facing the industry include mobile service maturity and a high level of competition, which will limit most operators' deleveraging capacity. Fixed-line services still offer growth headroom, but only operators with recent proactive capex execution to secure network competitiveness will enjoy the most benefit," said Alvin Lim, Director. "Underlying long-term growth potential remains weak."

Competitive pressures will not abate, especially in Mexico and Peru, which faced new entrants in recent years. The landscape in traditionally competitive markets, such as Colombia, will remain tough, further squeezing weaker operators' cash flows.

Free cash flow generation is forecast to remain modestly negative despite lower capex plans. The regional median net leverage is estimated to remain similar to the 2016 level of 2.3x, but this compares negatively to the 2014 level of 1.9x.

Ongoing FX volatility will continue to be negative for the telecom operators in the region, due to high currency mismatch for their hard currency debt against mostly local currency-based EBITDA generation. The impact, however, should be manageable.

Fitch does not foresee any catalyst, aside from M&A events, that could lead to material operational/financial improvement in the region in the short- to medium-term.

Source: Fitch Ratings release