Latin America Telecommunications, Media & Technology Sector a Defensive
The findings indicate that most of the companies in the TMT sector within Latin America are well positioned to maintain stable credit profiles, aided by strong cash generation, low to moderate leverage and favorable debt maturity profiles.
The introduction of number portability throughout the region, which started in Mexico and Brazil in 2008, is expected to increase competition going forward. Regional players have followed different ownership strategies, with some operations starting to exhibit cross ownership between fixed and mobile units. On the other hand, Carlos Slim's mobile (America Movil) and fixed (Telmex & Telmex Internacional) businesses continue to be controlled by separate companies. Furthermore, the spin off of Telmex Internacional from Telmex during 2008 reflects an increased regulatory risk in Mexico.
Most Latin American telecommunication companies, with the exception of Argentine companies, continue to have low exposure to foreign currency. As opposed to other sectors, companies in this sector have generally benefited from foreign currency derivatives, which have compensated for losses associated with foreign currency debt.
Fixed-line business is expected to continue delivering stagnant or declining revenues that should be compensated with increased broadband and, where allowed, with pay television services. In 2009, capital expenditures for wireless companies are expected to be manageable given current financial profiles, though companies may increasingly rely on vendor finance.
In addition to an overall outlook for the region by segment, the report provides a more in-depth analysis for the sector in Argentina, Brazil, Chile, Colombia, Peru, Mexico and Venezuela.
The full outlook report, titled 'Latin America TMT 2009 Outlook - Well Positioned for Tough Times' is available at www.fitchratings.com.
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