Airtel’s subsidiary in the Netherlands, Bharti Airtel International, has been awarded a ‘BBB’ rating for unsecured guaranteed bonds.
“The negative outlook does not reflect our view of Bharti’s underlying credit profile – which has improved due to strong growth in Indian and African wireless operations – but rather the increased likelihood that India’s (BBB- / Negative) land ceiling on ‘BBB-‘ “Such a move would limit Bharti’s IDR and senior issuance ratings to ‘BB +’,” Fitch said.
“Bharti’s IDR and senior emissions ratings are not directly limited by the government rating, but may not exceed the country ceiling, which reflects transfer and convertibility risks associated with foreign exchange liabilities,” it added.
Airtel’s shares on BSE closed 0.82% higher at Rs 764.95 today.
Fitch estimates that Bharti’s FY22 funds from operations (FFO) net leverage are 1.8-2.0x in FY22, well below the 2.5x threshold, beyond which the agency will take “negative rating actions”.
“We expect Bharti’s FY22 revenue to increase by 10% -12% and EBITDA by 20% -22% due to improvements in the Indian wireless market and strong growth in the African markets. In 1HFY22, consolidated revenue and EBITDA increased by 14% and 32% year-on-year, respectively, defying the Covid-19 downturn as it added 30 million subscribers, “said Fitch.
Fitch plans further industrial consolidation, which will see Reliance Jio and Airtel increase their total revenue market share (RMS) for private telecommunications companies to 80% -82% in 2022, from almost 77% -78% in June 2021. “Rival Vodafone Idea has quickly lost market share “Due to its weak balance sheet and limited financial flexibility, it has lost around 180 million subscribers in the last three years. It had 253 million subscribers at the end of September 2021,” it said.
FY22 wireless Earnings before interest, tax, depreciation and amortization (EBITDA) are expected to increase by 30% -33%, led by 15 million subscriber additions and tariff improvements of around 15%.
“Bharti increased its headline tariff by 20% -25% on prepaid plans with effect from 26 November 2021. In 1HFY22, Indian mobile revenue increased by 10% year-on-year and EBITDA 40% on a pre-Ind AS 116 basis, supported by a 7% increase in monthly average revenue per user (ARPU) to INR153 (USD2.1) and high monthly data usage of around 19 GB per user, one of the highest globally, ”said Fitch.