Ratings agency Moody's Investors Service on Tuesday raised the rating outlook of Bharti Airtel Ltd and its subsidiary Bharti Airtel Int'l (Netherlands) to positive from stable.
It also affirmed Bharti Airtel's Ba1 corporate family rating (CFR) and senior unsecured rating, as well as the Ba1 rating on the backed senior unsecured notes issued by Bharti Airtel Int'l (Netherlands) B.V.
"The outlook change to positive reflects Bharti's improving operating performance and credit metrics which, if sustained, could support an upgrade to investment grade within the next 12-18 months," Moody's Senior Vice President Annalisa Di Chiara said.
Moody's said that the Ba1 CFR rating considers the company's position as one of the largest telecom service operators globally in terms of subscribers (471 million), its solid market position in India's high-growth mobile market and its large spectrum holdings.
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Besides, its proven ability to access capital markets and the benefits of its strong and supportive shareholder base are also reflected in the ratings.
A continued expansion in the company's profitability, particularly at its core Indian mobile business, together with a steady reduction in its balance sheet debt is needed to mitigate the potential effect on Airtel's credit metrics of significant investments in 5G and the compounding growth of deferred liabilities during the moratorium period, Di Chiara said.
Bharti Airtel reported a 27 per cent increase in its consolidated EBITDA to Rs 27,200 crore for the six months ended September 30, 2021. "Moody's expects Bharti's consolidated adjusted EBITDA to increase toward Rs 57,000 crore-58,500 crore by the end of fiscal 2022, which ends 31 March 2022 -- around a 25 per cent increase over fiscal 2021's," the agency said.
It said Airtel's recently announced tariff increase is a meaningful step to drive average revenue per user (ARPU) higher, and supports the agency's expectation of rising profitability over the next 12-18 months.
Moody's also said that the recently-announced reform package by the Indian government for the financially stressed telecommunications industry will not only help strengthen Airtel's cash flow but also help ensure the long-term health of the sector.
Moody's expects Airtel's consolidated adjusted debt/EBITDA to steadily decline, even with investments in 5G spectrum, and cash flow savings from moratorium to be redeployed to reduce debt permanently.
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