Asian carriers struggle to control operating costs

Operating-expenditure (opex) growth is now outpacing revenue growth among key Asian service providers, reveals a new report from MWL Consulting (Thailand). For the first six months of this year, revenue growth for 23 carriers amounted to 13%, while opex grew 15% over the same period last year. That intensifies pressure on carriers to take measures now to reduce their cost base, particularly in sales and marketing, say MWL analysts.

There is good news, however; capital expenditures (capex) are under control. Modest 9% growth in the first half of this year cut the much watched capex/sales ratio to 17% from 18% last year (and down from 28% in 2001). Net income is growing at 13%-the same rate as revenue growth-but this growth relies heavily on a few outperforming carriers. Capex is still high overall, relative to Europe and North America; some Asian carriers are increasing capex substantially to support broadband and mobile build-outs.

Solid companies with revenue growth comfortably exceeding opex growth, high net profit margins, and moderate capex intensity include SingTel Optus, KDDI, AIS, Telekom Malaysia, PLDT, Chungwa Telecom, Telecom New Zealand, and Bharti Tele-Ventures.

For more details on the report, “Overcoming the Opex Obstacle to Telecom Profitability in Asia- Pacific,” visit www.mwl-consulting.com.