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WhatsApp acquisition to dent telcos cash flows

March 1, 2014 2:00 pm

Ratings agency Fitch has warned that the acquisition of WhatsApp by Facebook and the former’s plans to enter voice calls will further dent global telecoms operators’ ability to increase free cash flows, but ruled out serious impact on the Indian players in the near-term. “‘Over-the-top’ (OTT) operators which also include Skype, Twitter and Google, apart from WhatsApp, provide a cheaper substitute for telcos’ traditional voice and text messaging services. But the resulting surge in data use is not translating into proportionally higher Ebitda for telcos as data services have lower margins than traditional services they replace,” said Fitch. “Thus, while investment in data networks is still economically justified, weakening cash flows from traditional services means that telcos have to spend more capital simply to maintain Ebitda at the same level,” Fitch said in its report.