Many telecoms firms at risk of financial distress - study

Almost half of the companies in the global ICT industries face the risk of financial problems due to challenging markets and high levels of debt. Some 44 percent of telecoms and technology companies are at risk of default or bankruptcy within two years, the Financial Times writes citing research by advisory firm AlixPartners. In the hardware sector, and especially in the consumer electronics industry, as many as nine out of ten companies are at risk due to low profit margins as a result of weak demand and strong competition. In the telecommunications sector around three-quarters of companies were found to be at risk due to high levels of debt taken on to expand networks and to fund acquisitions. Michael Weyrich, managing director at AlixPartners, said that the industry had emerged from the recession relatively unscathed. "However, the industry is facing a number of fundamental challenges, with rapidly evolving consumer demand, intense competition from all corners of the globe, narrowing margins, high leverage, and the need for substantial investments in capital expenditure in a tight capital market environment. The gap between winners and losers is widening, and as a result, we expect continued, industry-rattling moves and changes."