Moody’s gives downbeat outlook for EMEA telecoms

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The outlook for the telecoms sector in Europe, Middle East and Africa for the coming 12 to 18 months remains negative, Moody's Investors Service said in its annual report.

The credit ratings house, Moody’s, said the key reasons for this include “the expected absence of revenue growth or any catalysts to accelerate growth in 2020,” well as continued pressure on prices from intense competition, constraints on consolidation from regulation and slower-than-expected GDP growth in Europe.

No growth

"Revenue growth is unlikely to materialise in 2020 as the anticipated catalysts, namely more benign regulation and the contribution of 5G, are both absent," said Carlos Winzer, a Moody's Senior Vice President.

In August, Gartner predicted that in 2020, worldwide 5G wireless network infrastructure revenue will reach $4.2 billion, an 89% increase from 2019 revenue of $2.2 billion.

The analyst house calculates that that 7% of communications service providers worldwide have already deployed 5G infrastructure in their networks.  Although consumers represent the main segment driving 5G development, Gartner, and others, expect that telcos will increasingly aim 5G services at enterprises.

Financial pressure

The Moody’s report also notes that companies will have limited financial flexibility in 2020 to face the new investment cycle, as some still have high debt levels.

“Pressure on share prices in the industry suggests the potential for activist investors to enter the sector and seek to change financial policies and strategies,” Moody’s said.