| WASHINGTON, March 2
WASHINGTON, March 2 Moody's credit rating agency
lowered its outlook for the U.S. telecommunications industry to
negative from stable on Thursday amid growing price competition
for wireless services.
Moody's vice president and senior credit officer Mark
Stodden forecast in a report that U.S. aggregate wireless
industry cash flows would fall by 2 percent in 2017.
Analysts have said that the industry's push to compete on
unlimited data plans could hurt profit margins, putting more
pressure on carriers to control costs.
In a shift in the price wars among the four biggest U.S.
wireless carriers, Verizon Communications Inc last month
said it would once again offer an unlimited pricing plan.
Verizon, the biggest U.S. wireless carrier, would be making
the offer for the first time in more than five years. AT&T Inc
, T-Mobile US and Sprint Corp all responded
by sweetening their existing unlimited data plans.
The Moody's Corp report said T-Mobile's strategy has
"pushed its bigger peers to an unhealthy level of competition"
and said the expansion of unlimited data plans would reduce the
industry's long-term revenue growth potential.
At the same time, the new data plans will prompt more data
usage and require more capital spending by carriers, Moody's
said, predicting a 7 percent growth in capital investment to
fund network traffic volumes this year.
The report predicts flat aggregate industry cash flow in
2018 after strong cash flows in 2015 and 2016.
The shift is "in response to competitive pressures, with
Verizon and AT&T now responding more deliberately, particularly
to T-Mobile’s relentless marketing and expanding market share."
Stodden also said cable firms could pose an additional
Cable operators Comcast Corp and Charter
Communications Inc have said they will launch wireless
services on Verizon’s airwaves in 2017 and 2018, respectively.
A tie-up of Sprint and T-Mobile "would reduce price pressure
and provide a path back to aggregate industry cash growth," the
report said. Moody's puts the odds of Trump administration
regulators approving a tie-up at around one in three.
Reuters reported on Feb. 17 that SoftBank Group Corp
is prepared to cede control of Sprint Corp to
Deutsche Telekom AG's T-Mobile to clinch a merger of
the two U.S. carriers, citing people familiar with the matter.
SoftBank has not yet approached Deutsche Telekom to discuss
any deal because U.S. regulators imposed strict anti-collusion
rules during an airwaves auction. After the auction ends in
April, the parties are expected to begin negotiations. In 2014,
SoftBank abandoned talks to acquire T-Mobile for Sprint amid
opposition from U.S. regulators.
(Reporting by David Shepardson in Washington and Anjali
Athavaley in New York; editing by Grant McCool)