Chennai: Leading global telecommunications company Bharti Airtel was given a tough run by Moody’s as the credit rating agency downgraded the rating of the telco.
Moody’s also backed senior unsecured notes issued by Airtel’s African arm due to uncertainty around profitability, cash flow and debt levels. Airtel, however, stressed that its businesses continue to be diversified and strong.
“Moody’s Investors Service (‘Moody’s’) has downgraded to Ba1 from Baa3 the senior unsecured rating for Bharti Airtel Ltd. (Bharti) as well as the backed senior unsecured notes issued by Bharti’s wholly-owned subsidiary, Bharti Airtel Int’l (Netherlands) B.V.,” the agency said in a statement.
“At the same time, Moody’s has assigned a Ba1 corporate family rating (CFR) to Bharti and withdrawn the company’s Baa3 issuer rating. The ratings outlook is negative,” Moody’s report said.
Credit ratings reflect a company’s calibre to repay debt and raise funds. Ratings range between Aaa, which means best, to lowest category C. Ba1 rating means obligations are judged to have speculative elements and are subject to substantial credit risk, but have a superior ability to repay short-term debt obligations.
Moody’s vice-president and senior credit officer, Annalisa DiChiara, said, “The downgrade reflects uncertainty as to whether or not the company’s profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telco market.”
The report said Bharti Airtel reported EBITDA of Rs 26,500 crore for the 12 months ended 31 December, representing a 15.5 per cent year-over-year contraction and the profitability of its core Indian mobile segment, which contributes around 37 per cent of EBITDA, remained low, generating just Rs 9,800 crore over the same period.
Playing down the rating, Bharti Airtel, in its response, stressed that its business remain as strong as ever.
“Bharti Airtel and its businesses continue to be diversified and strong. While 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 overall business going forward,” Bharti Airtel said in a filing.
“The company’s capital structure has already benefitted from the recent equity infusions via the marque investors in our Africa business as also infusion in India DTH business, totaling to $1.7 billion,” Airtel said.
ANOTHER VIEWPOINT
Rating agency Fitch Ratings has maintained a stable outlook on Airtel on account of planned asset sales, including a potential initial public offer of its African entity and the sale of its stake in the Indus-Infratel tower company, as well as an imminent mobile tariff recovery in India that will help it ease pressure on leverage. Airtel said its focus is to maintain an optimum capital structure at all times and enhance financial strength.
RECOVERY AFTER LOSS
Bharti Airtel’s shares recovered after early losses yesterday to close almost flat at Rs 307.85 apiece on the BSE. The scrip had declined over 4per cent during the day after Moody’s downgraded the credit rating of the telco. Shares of Bharti Airtel crashed nearly 5 per cent on bourses earlier.