When discussing our Telecom Regulatory Environment (TRE) indicator, we first introduce the concept of regulatory risk. I emphasize that it is not limited to the regulatory agency’s actions, but to all government actions that have a bearing on the operation of the company. The list of woes afflicting Vodafone in India is illuminating. “The combination of the capital gains tax, uncertain regulation and the very tough competitive environment has caused investors to say it wasn’t great timing” to do the deal, said Robert Grindle, an analyst with Deutsche Bank in London. Still, he said, “India is one of the fastest growing assets in Vodafone’s footprint, and without the contribution from India the company would have much lower top line growth than it does.
Fitch Ratings, a global rating agency, said the South Asian and South East Asian countries are divergent in terms of regulatory risk. It says Sri Lanka has the highest risky regulatory environment while the risk is lowest in Malaysia. Buddhika Piyasena, Director in Fitch’s TMT team, said, Sri Lanka’s high regulatory risk score reflects insufficient transparency in the regulatory process combined with the regulator’s strong connection with the political framework. The total regulatory risk score for each market is derived based on three major sub-categories: Political & Social Policy Risk. Industrial Policy Risk.