KUALA LUMPUR: Competition in Malaysia's mobile sector will persist amid weak consumer spending and the entry of incumbent fixed operator, Telekom Malaysia Bhd into the 4G market.
In a special report released in Singapore yesterday, Fitch Ratings said competition in the fixed-line and fibre broadband segments, however, will remain moderate.
Fitch forecasts revenue to grow by a low-single-digit percentage, driven by expansion in fibre rollout.
The average operating earnings margins of telecommunication companies are likely to shrink due to revenue pressure and cost increases.
Expansion in the long-term evolution (LTE) network and fibre broadband will drive capital expenditure investments.
Fitch expects this to keep TM's funds flow from operations-adjusted net leverage around two times, which is close to Fitch's negative guideline.
"We anticipate limited upside on the sector outlook as the ongoing weakness in the ringgit and intense competition are likely to weigh on operating cash flows," it said.
"Capital expenditure and dividends will remain high, which ensure that credit metrics are much more likely to deteriorate than to improve.
However, a significant easing in competition which improves margin and cash flow from operations could lead to the sector outlook turning stable, from negative," it added.