Report finds that the most immediate impact of the financial crisis is on investment & financing
A new report from the ITU finds that the most immediate impact of the financial crisis on the global ICT industry is on telco investment and financing. A prolonged recession could potentially starve operators of the capital investment needed to upgrade their network infrastructure.
The report finds that investment funds are less readily available, while refinancing costs have rised sharply, with recent telco debt issuance in Europe being secured at spreads of up to 4.75% in late 2008, some 3-4% higher than the situation pre-crisis (with the exact rate depending on individual firms' debt ratings). Where bonds can be refinanced, it is clear that they are incurring higher interest costs. For example, Sprint Nextel recently renegotiated its debt from its original credit line of US$ 6 billion at LIBOR plus 0.75% for a new line of US$ 4 billion at LIBOR plus 4% (depending on the company's debt rating). In their industry strategy paper, "A defensive sector for defensive times", Deutsche Bank estimates that European incumbents alone have some EUR 21 billion of bonds matruing soon in 2009, with a further EUR 26 billion of other financial liabilities, which may need to be refinanced over the coming year.
Read more in ITU's forthcoming report, "Confronting the Crisis: Its Impact on the ICT Industry", which will be published on Monday 16 February 2009.