Rated GCC telecoms operators’ earnings will fall in the next few years, Moody’s Investors Service said in a new report.

The key drivers behind the contraction in EBITDA margins is a combination of fairly mature domestic markets with high penetration rates, particularly in the mobile segment and consumers shifting toward more data consumption, which is cheaper than traditional voice calls. The coronavirus-related lockdown and the sharp decrease in oil prices will also hamper revenue and EBITDA generation.

“Free cash flow generation will also decrease over the next two to three years as capital spending remains high and dividend payments stable, despite decreasing cash flow from operations,” said Julien Haddad, Vice President – Senior Analyst.

M&A activity by GCC telecoms operators will remain low, with companies targeting opportunities in select geographies where the price is right and the associated execution risks are limited. Governments will likely provide support to the operators if necessary.

Rated GCC telecoms operators include: Emirates Telecommunications Grp Co PJSC (Etisalat, Aa3 stable), Saudi Telecom Company (STC, A1 negative), Qatar’s Ooredoo Q.P.S.C. (A2 stable) and Oman Telecommunications Company S.A.O.G. (Omantel, Ba2 review for downgrade).