Financial Outlook for Main Colombian Telecoms Expected to See Modest Improvement

Colombian telecom operators should see modest improvement in their financial profiles in 2024 and 2025, according to a recent analysis from Fitch Ratings.

While free cash flow improvement, along with expected cost-cutting initiatives and a reduction in capital expenditures, will support these positive developments, the outlook for the telecommunications sector in Latin America remains negative for 2024 and “these potential gains are expected to be constrained by persistent competitive pressures within the sector,” wrote the New York-based ratings agency in their report.

A big overall constraint is the companies ongoing challenge to make a return on large 5G and fiber investments.

“Instrumental to maintaining credit profiles and debt trajectories,” stated Fitch, “is the ability of operators to defend market share while effectively navigating investment decisions and dividend disbursements, particularly in the face of the ongoing transition to 5G mobile networks and the roll-out of fiber-optic infrastructure.”

Empresa de Telecomunicaciones de Bogota (ETB), in particular, was noted as having a negative outlook, while Fitch has assigned a stable outlook to both UNE EPM Telecomunicaciones (UNE EPM) and Colombia Telecomunicaciones (ColTel).

“An improving financial profile has recently enabled UNE EPM to access local capital markets, issuing COP160 billion under its current bond program, which has further improved the company’s financial flexibility,” wrote Fitch Ratings.

Overall, the mobile market in the Andean nation “should continue to show significant pricing pressure as incumbent operators maintain promotional activity,” particularly given the jump in mobile penetration, per capita, from 135% in 2019 to 160% at the end of 2023.

On the broadband side, the market appears stable, but ETB is struggling to gain share, while ColTel “continues to outpace rivals with its superior FTTH network” and UNE EPM saw a slight drop in market share (from 20% to 18%) in 2023.

“Longer term, Fitch sees further growth potential in the fixed broadband space, given Colombia’s relatively low penetration rate of 17% per capita as of December 2023,” stated the agency. “However, a near-term deceleration in growth is expected, normalizing from higher levels seen during the pandemic. This is evidenced by a modest decline in total broadband accesses during 2H23, down from the peak levels seen in the 2Q23.”