Fitch expects tough times for Latin American telecom sector

Latin America’s telecom sector faces a deteriorating outlook due to a weak consumer environment, and moderating but still high inflation and interest rates, according to a Fitch report.

The analysis is part of the ratings agency’s recently published Latin American 2023 Sector Credit Outlook.

The challenging macro environment coincides with high competition in most markets, resulting in pressured average revenue per user (ARPU) and Ebitda margins for the main rated telcos in the region, said Fitch.

In the mobile segment, the agency expects continued migration to postpaid from prepaid as operators deal with high capital expenditures for the rollout of fiber-to-the-home (FTTH) and the transition from 4G to 5G. 

Of all telcos and carriers assessed by Fitch by the time of the publication, 55% had a stable credit outlook, 20% had a negative outlook, and only 5% had a positive one. The remaining 20% had no ratings outlook or watch assigned by the agency.

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The highest-rated telco is América Móvil, with ‘A-‘ and a positive outlook.

Next comes Televisa (‘BBB’, negative), Telefónica Móviles Chile (‘BBB-‘, stable), Chilean telco Entel (‘BBB-‘, negative) and Tigo Paraguay (‘BB’, stable). Fitch’s ratings analysis for the report did not include Telefônica Brasil or TIM, although it did include Brazilian telco Oi.

In Mexico, the four main companies in the fixed segment are experiencing aggressive competition, which is allowing smaller operators to increase market share, said Fitch, adding that the competitive situation could lead to falling ARPU. 

The agency also said that the country’s macro uncertainties could slow the expansion of 5G networks.

Chilean operators are “challenged by intense competition and reduced Ebitda-minus-capex margins,” which limit their ability to cut debt levels, whereas in Colombia credit pressures come from a weak consumer environment, market saturation and pricing pressure, which is compounded by high interest rates and investment demands, according to Fitch.

“With the highest mobile market saturation in the Andean region, Colombia’s telecom sector has experienced intense competition and significant capital expenditure for network upgrades,” it said.

Fitch projects the mobile subscriber base in Brazil to grow by 1.5% this year, and the fixed one by 5.9%. The forecast for the fixed segment is the highest of the region’s six largest economies.

The agency expects Mexico to see the lowest mobile base growth in 2024, with an expansion of 1.1%.

The full report can be accessed in the Documents box in the upper-right corner of the screen.