Tele Risk

Dec 02, 2009 (LBO) – Sri Lanka has been rated the telecommunications market with the highest regulatory risk score in the Asia-Pacific region, according to a new survey by Fitch Ratings. It said Fitch’s Regulatory Risk Score provides an indication of how the regulatory environment impacts the ability of an operator to generate free cash flow (FCF).

This in turn affects the rating process, as a credit rating is Fitch’s opinion about the future ability of a company to generate free cash flow to repay its debts.

“Notably, Australia and Sri Lanka receive the highest risk score under the incumbent and second-entrant classifications, whereas Malaysia and Hong Kong (second-entrant) are assessed as having the lowest regulatory risk,” the report said.

The incumbent operators typically score lower (implying a lower risk) than the corresponding second-entrants for each market, largely due to state ownership or a legacy regulatory bias which has resulted in a more favourable environment for the incumbents.

In the risk scores on a combined basis, when averaging the separate incumbent and second-entrant risk scores, “Sri Lanka markedly stands out as the market with the highest