Moody’s says may downgrade Airtel rating if margins dip further

New Delhi, Apr 27: Telecom major Bharti Airtel may face a rating downgrade in next 6-12 months if intense competition remains in the market and decreases its margins, Moody’s Investors Service said while affirming Baa3 ratings with negative outlook to the company. “The ratings are likely to be downgraded within the next 6-12 months if heightened competition persists in its Indian wireless business, such that consolidated EBITDA or margins deteriorate further from current levels,” Moody’s said in a statement.
Moody’s Investors Service has affirmed Bharti Airtel (Bharti) Baa3 issuer rating and senior unsecured debt ratings, as well as the Baa3 ratings on the senior unsecured notes issued by Bharti Airtel International (Netherlands) B.V., which are irrevocably and unconditionally guaranteed by Bharti. “The outlook on the ratings is negative,” the report said. Credit ratings reflect an organisation’s ability to repay debt.
The Baa3 rating means the entity is medium-grade and subject to moderate credit risk and has an acceptable ability to repay short-term obligations.
“The affirmation of Bharti’s Baa3 rating and negative outlook recognises that the company’s leverage metrics remain elevated as profitability continues to be under pressure,” Moody’s Vice President and Senior Credit Officer, Annalisa Di Chiara said.
The negative outlook reflects the company’s high leverage levels with adjusted debt to EBITDA ratio of around 3.8 times on a consolidated basis at year-end March 2018. The consolidated net debt of Airtel increased to Rs 95,228 crore at the end of March 2018 from Rs 91,714 crore at the end of December 2017.
The country’s largest mobile operator Bharti Airtel reported its lowest quarterly consolidated net profit in at least 14 years, as competition with free voice calls and dirt-cheap data tariffs from new entrant Reliance Jio ate into its margins.