S&P Global – Telecoms Credit Outlook, 2024

The repot by the S&P Global – Telecoms Credit Outlook, 2024 highlights several key changes and assumptions in the telecom industry. Despite inflation impacting profitability growth, EBITDA margins are still increasing due to price rises and efficiency programs. Debt issuance has decreased, reflecting turbulent capital markets, higher interest rates, and a shift towards back-end maturity walls. Mergers and acquisitions have become more common in some markets as telecommunication companies seek to consolidate and alleviate competitive pressure. The key assumptions for 2024 include steady earnings, with a projected 3%-4% EBITDA growth from 2023 to 2025 driven by higher revenue and margins. However, intense competition is expected in some markets, leading to higher churn rates and lower average revenue per user levels due to unfavorable market conditions. Capital expenditures are expected to vary, with cuts in developed markets due to lower 5G and fiber spending. In contrast, markets with slower rollouts will continue to invest in these technologies. Several key risks are identified. Companies with near-term refinancing or unhedged floating-rate debt may experience lower cash flow if interest rates remain high. A potential recession could lead to increased competition, resulting in discounted offerings that could negatively impact pricing and margins. Additionally, the risk of eroding credit metrics exists if there are higher-than-expected investments, mergers and acquisitions, or shareholder returns.