KUALA LUMPUR, Oct 23 — Telecommunications companies (telcos) in Singapore, Malaysia and Indonesia pay the highest dividends to their respective governments, said Moody’s Investors Service.
It said capital spending, dividends and share buybacks, spectrum payments and taxes are the largest costs for telcos in South and Southeast Asia.
In a note today, the credit rating agency said dividends paid to governments are a bigger cash drain than spectrum payments in several countries.
Telcos that pay a large portion of their revenue in dividends – Malaysia and Singapore – tend to pay a small portion for spectrum, while telcos that pay negligible dividends such as in India and Thailand, pay a large portion of revenue for spectrum, it said.
Moody’s said telcos in Malaysia and Singapore have paid around 20 per cent of their revenue to the government, twice as much as the 7.0 to 10 per cent for telcos in Pakistan and India.
Singapore, Malaysia and Indonesia have more government-owned incumbent telcos than other countries.
“Over the last 10 years, the leading telcos in these three countries have paid more in dividends to their respective governments than their private-sector counterparts in other countries have paid for spectrum, as reflected by total payments to the government as a percentage of telcos’ aggregate revenue.
“As a result, they have also paid the highest percentage of their aggregate revenue to their respective governments,” it said.
In Malaysia, where dividends to the government total 11.9 per cent of the three leading telcos’ aggregate revenue, the government holds stakes in each of those three telcos – Celcom Axiata Bhd, Maxis Bhd and DiGi.com Bhd.
These stakes are held through government-related entities such as Khazanah Nasional Bhd and Employees Provident Fund, which is a central provident fund under the supervision of the Ministry of Finance.
It said telcos in Singapore, Indonesia and Malaysia also tend to have higher levels of government support through the more stable and predictable regulatory frameworks in those countries.
In Malaysia, it said the Malaysian Communications and Multimedia Commission (MCMC) reacted quickly to the proposed merger of Axiata Group Bhd (Baa2 stable) and Telenor in May, by issuing mergers and acquisitions guidelines two weeks after the announcement.
However, MCMC has also implemented regulations that have been detrimental to the operators, it said, whereby in 2018, it implemented the Mandatory Standard on Access Pricing, which regulates broadband prices and caused Telekom Malaysia Bhd’s (A3 stable) revenue to contract 2.2 per cent.
Telekom Malaysia and Axiata’s ratings benefit from one notch of uplift because of government support, it said.
“High dividends and spectrum payments, coupled with high capital spending, have resulted in negative free cash flow from 2009 through 2018 for telcos in five of the seven South and Southeast Asian countries we analysed in this report.
“We expect these trends to continue through at least 2021. Given their lack of free cash flow, we do not expect the telcos will be able to generate enough cash to pay down debt and reduce their elevated leverage,” Moody’s added. — Bernama
