Moodys downgrades telecom giant Bharti Airtel

Moody’s Investors Service on Tuesday downgraded Bharti Airtel’s rating on uncertainty over recovery in the telecom operator’s revenue and profitability amid the intense competition in the Indian market created by new players like Jio.

The rating agency, which in November placed Airtel’s rating under review for downgrade, has downgraded the company’s rating from Baa3 to Ba1, which is a non-investment grade rating. It added that the ratings outlook was negative.

The senior unsecured notes of Bharti Airtel Limited and the backed senior unsecured notes of Bharti Airtel Int’l (Netherlands) B.V. were downgraded to Ba1 from Baa3, the rating agency said in a statement.

According to the agency, the downgrade reflected uncertainty as to whether or not the company’s profitability, cash flow situation and debt levels could improve, given the competitive dynamics in the Indian telecom market. The agency pointed out that Bharti had reported an EBITDA of Rs. 265 billion for the 12 months ending December 31, representing a 15.5 per cent year-over-year contraction. Additionally, the profitability of its core Indian mobile segment, which contributes about 37 per cent of EBITDA, remained low, generating just Rs. 98 billion over the same period.

The cash flow from the core Indian mobile segment has to improve substantially to strengthen the company’s credit quality and support greater financial flexibility. The agency said that the rating outlook could be stabilised if Bharti strengthens its credit profile with stabilisation of its core Indian mobile and non-mobile services.

Businesses strong

Responding to this development, Bharti Airtel said its businesses continue to be diversified and strong. Africa and non-mobile businesses in India exhibit healthy momentum, the continuing trend of robust growth in data volumes in India and also the imminent recovery in voice tariffs will further help the overall business, going forward. It further pointed out that the company’s Africa debt had already been reduced to US$3.5 billion and the US$6 billion of debt in India is under 16-year deferred spectrum payments, the overall debt situation is already comfortable.

On Wednesday, the stock of Bharti Airtel opened at Rs. 307 per share and touched high/low of 309.45/301 per share.