KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) expects 3% revenue growth for the telecommunications industry this year, even as it noted that telecommunications companies (telcos) would be facing heightened competition, a crowded landscape and a persistent downtrend in traditional voice and SMS revenues. 

“Despite the keener competition, the credit profiles of leading Malaysian telcos remain comparable with those of their leading regional peers,” observed RAM Ratings’ co-head for infrastructure and utilities Davinder Kaur.

“Based on our analysis, we project a 3% revenue growth for telcos in 2015. While we expect telcos to maintain their profitability in the near term amid cost-optimisation efforts, the increasingly more saturated market could compress margins in the medium term,” she said in a statement released by the rating company yesterday.

RAM Ratings also sees telcos’ cash flow-generating aptitude remaining relatively stable this year, based on its expectation that the major players will maintain their market positions without any significant price disruption amid increasing competition.

It also said future growth would mainly stem from broadband services, backed by relatively low penetration rates and accelerating data demand. 

On the other hand, the growth in data revenue would be insufficient to offset the loss in traditional voice revenue.

“To stay in the game, telcos must keep on improving their service quality and strive to remain relevant through their pricing propositions.

“Telcos focus on the protection of their average revenue per user by monetising data, encouraging users to move up the data-allowance ladder and managing their infrastructure investments. That said, an all-out price war is unlikely as telcos continue prioritising their profitability alongside aspirations of wresting more market share,” it said.

This article first appeared in The Edge Financial Daily, on March 17, 2015.