Wireline Sector Continues to Face Impediments, S&P Says
The wireline sector faced many obstacles in 2017, and some likely will continue this year and beyond, said an S&P Global Ratings release Thursday. The 2017 challenges included "secular industry declines, intense competitive pressures, and difficulties integrating mergers and acquisitions,"…
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it said. "These impediments led to dwindling revenue and cash flow," plus falling stock and bond prices. S&P Global Ratings expects some of the trends to continue in 2018 and beyond even as issuers consolidate and seek alternative avenues for growth, according to 'Credit FAQ: Why U.S. Wireline Companies Are Getting Few Calls With Good News'" (subscription required). "The drop-off in revenues has markedly constrained profitability and free cash flow generation because wireline companies have a high percentage of fixed costs," said S&P credit analyst Allyn Arden. "Many of them have elevated leverage, limiting financial flexibility and making it difficult to compete with cable and alternative telecommunications providers." S&P "believes wireline companies ultimately need to improve their capital structures to better reflect industry conditions, but their ability to do so is highly uncertain because of declining cash flow and limited financial flexibility."