Moody's upgrades Bharti Airtel rating to investment-grade

New Delhi [India], May 26 : Moody's Investors Service on Thursday upgraded the ratings of telecom operator Bharti Airtel to Baa3 from Ba1. With the upgrade, the rating of Bharti Airtel has become 'investment' category.
Moody's has also upgraded to Baa3 from Ba1 the senior unsecured debt rating on the bonds issued by Bharti Airtel as well as on the backed senior unsecured notes issued by Bharti Airtel Int'l (Netherlands) B.V.
Moody's has changed the outlook on the ratings to stable from positive.
"The rating upgrade reflects the continued strengthening of Bharti's operational metrics as well as the stabilisation of its financial profile, including lower leverage levels and improving profitability," Annalisa Di Chiara, a Moody's Senior Vice President, said in a statement.
"Moreover, we expect that these improvements can be sustained given Bharti's solid market position, rising profitability at its core Indian mobile business and prudent financial management," Chiara said.
On the ratings rationale, Moody's said "Bharti's Baa3 rating considers the company's position as one of the largest telecom service operators globally in terms of subscribers (491 million), its solid market position in India's (Baa3 stable) high-growth mobile market and its large spectrum holdings. Bharti's proven ability to access capital markets and the benefits of its strong and supportive shareholder base are also reflected in the ratings."
The company reported over a 25 per cent increase in its consolidated adjusted EBITDA to Rs 581 billion for the fiscal year ended 31 March 2022 compared with that in the prior year.
This reflects a growing proportional share in its 4G subscriber base and the further step-up in average revenue per user (ARPU) at the company's core Indian mobile services segment -- which contributes around 53 per cent of consolidated EBITDA.
The company's tariff increase in December 2021 helped drive ARPUs higher and supports Moody's expectation of a sustainable profitability level over the next 12-18 months.
Moody's expects a further 15-20 per cent increase in Bharti's consolidated adjusted EBITDA by the end of fiscal 2023, reflecting stable growth at its Indian operations and African operations, which are held through its 56 per cent- owned subsidiary, Airtel Africa plc (Airtel Africa), and contribute around 30 per cent of consolidated EBITDA.
While some uncertainty remains related to spectrum purchases and the funding for further 5G investments, Moody's still expects Bharti to maintain leverage measures that are consistent with an investment-grade rating. This expectation is based on the trajectory of the company's profitability and the cash flow savings accruing from the moratorium of statutory dues payable to the government. The company's leverage, as measured by adjusted debt/EBITDA, also dropped to around 3.0x as of 31 March 2022 from 3.8x in 2021.
Moody's also expects investments in 5G spectrum, should an auction occur over the next few months, will not worsen the company's leverage profile. This is based on Moody's assumption that the company will largely fund its participation with cash and cash flow from operations and also has additional calls on its remaining balance under the rights issue (or up to Rs 158 billion). As a result, Moody's still expects consolidated leverage, to remain within the 2.5x-3.0x range in the year ending 31 March 2023.