Fitch: Latin American Telecom Stable in 2014 Despite Mounting Negative Pressures

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The 2014 outlook for Latin American telecom and media is stable on solid balance sheets and mobile data services growth, according to a new Fitch Ratings report.

"While the overall rating outlook remains stable, negative rating actions increased in 2013 vis-a-vis previous years. Increased debt funded merger and acquisition activity explains about half of the actions and outlook revisions. Heightened competition and increased regulatory pressures are also weakening credit quality," said Sergio Rodriguez, Fitch Ratings Senior Director.

Capex to revenue ratio is close to 17 percent, and free cash flow, with an expected average between 8 and 10 percent, should be limited to investments in broadband and 4G deployments, expanding network coverage, and acquiring spectrum through auctions.

Legacy fixed operators should continue integrating fixed networks with mobile and, when possible, offer bundled services in an effort to compete with altnets. These investments should help fixed line operators achieve cost and expense efficiencies, and mitigate revenue pressures on fixed and mobile voice.

Latin American regulators are increasing competition in an effort to bring affordable telecom and broadband services to the masses. This could affect the market position and profitability on incumbents and resulted in new laws. These laws may prevent leading players from participating in spectrum auctions. They also could reduce mobile termination rates and increase fines for operators.

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