OREANDA-NEWS. Fitch Ratings says in a Special Report released today that competition in the Malaysian mobile sector will persist amid weak consumer spending and the entry of incumbent fixed operator, Telekom Malaysia Berhad (TM, A-/Stable), into the 4G market. However, competition in the fixed-line and fibre broadband segments will remain moderate.

Fitch forecasts revenue to grow by a low-single-digit percentage, driven by expansion in fibre rollout. The average operating EBITDA margins of telcos are likely to shrink by 70bp-100bp, due to revenue pressure and cost increases. Expansion in the long-term evolution (LTE) network and fibre broadband will drive capex investments. Fitch expects this to keep TM's funds flow from operations (FFO)-adjusted net leverage around 1.9x-2.0x - 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. Capex 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.

The report "2016 Outlook: Malaysia Telecommunications" is available on www.fitchratings.com.