Moody’s Investors Service on September 11 revised Bharti Airtel’s credit outlook rating to stable from negative on account of easing of competition in the telecom sector, increase in 4G customer base and mobile services rates from December. It also considered options given to the company to make payment of pending adjusted gross revenue in instalments while revising the outlook.
“Moody’s Investors Service has affirmed Bharti Airtel Ba1 corporate family rating and senior unsecured rating as well as the backed senior unsecured notes issued by Bharti’s subsidiary, Bharti Airtel Int’l (Netherlands) B.V. At the same time, Moody’s has changed the rating outlook to stable from negative,” Moody’s said in a statement. Credit rating indicates ability of a company to pay back debt.
“The ratings affirmation and change in outlook to stable reflect improving profitability at Bharti’s core Indian mobile business, because of a moderation in industry competition, an increase in its 4G customer base, and a tariff hike from December 2019,” Moody’s Senior Vice President Annalisa DiChiara said.
The Supreme Court earlier this month granted 10 years time to Airtel and other companies to clear their AGR dues to the government, starting next fiscal year, instead of 20-year period that was approved by the Cabinet.
“The staggered payment resolution related to Adjusted Gross Revenue (AGR) liabilities is also a positive development. Overall, the company’s operating flexibility is improving and will benefit from a gradual expansion of profitability, which will provide a buffer against any material deterioration in credit measures and support a steady deleveraging,” DiChiara said. According to the Department of Telecom, AGR liability on Bharti Airtel stood at around Rs 35,586 crore.
The company has paid around Rs 13,004 crore in AGR dues and additional Rs 5,000 crore as an ad-hoc payment. Moody’s said it could upgrade Bharti’s ratings if its operating performance improves such that its consolidated leverage is sustained below 2.5 times, which needs to be achieved in conjunction with a material expansion in profitability at its core Indian mobile business.
The downward ratings pressure of Bharti Airtel would arise if its debt reduction fails to materialise, earnings and cash flow deteriorate further, or its market share (on a revenue basis) contracts materially, Moody’s said.