Bharti Airtel's earnings and cash flows are expected to rise over the next 24 months, benefitting from the industry-wide raise in mobile tariffs, said S&P Global Ratings. On November 22, 2024, the global rating agency revised its rating outlook on Bharti Airtel to positive from stable. S&P Global Ratings has affirmed 'BBB-' long-term issuer credit rating on Bharti Airtel.
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Upgrades Bharti Airtel's Outlook to Positive
According to the rating agency, the positive outlook reflects the likelihood of an improvement in Bharti Airtel's stand-alone credit profile (SACP) owing to its healthy earnings and easing leverage. "However, an upgrade of the company could remain contingent on a similar action on the sovereign rating on India," the rating agency said in a statement on Friday.
Impact of Mobile Tariff Hikes
The rating agency said the strong growth in India earnings will be largely driven by a hike in mobile tariffs in the country earlier this year. Prices of Airtel's mobile plans were up 10 to 21 percent, effective July 4, 2024, as reported by TelecomTalk.
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Projections for Fiscal 2025 and 2026
The rating agency projected EBITDA from Bharti Airtel's Indian operations will rise 18 percent-20 percent in fiscal 2025 (year ending March 31, 2025), and by a further 12 percent-15 percent in fiscal 2026 with most of the growth coming from the mobile segment. S&P Global Ratings also anticipates higher earnings from Bharti Airtel's home and enterprise segments due to increased uptake of home broadband and enterprise digitalisation.
Subscriber Behavior on Tariff Hikes
"Most of the benefit of the tariff hike will likely materialise within the next two quarters as existing plans play out their remaining validity periods. In our view, telecom companies (telcos) will likely lose some subscribers after the tariff hike because the higher costs will push some consumers to reduce the number of SIMs they hold," the agency added.
Some of the gains from the tariff hike are already reflected in Bharti Airtel's performance in the quarter ended September 2024. The company's average revenue per user (ARPU) for the quarter was Rs 233, up 10.4 percent from the previous quarter, while net subscriber loss was less than 1 percent.
The strength in Bharti Airtel's Indian operations will more than offset a currency-led decline in the Africa segment, the report noted. Bharti Airtel's rising earnings and cash flows will help it deleverage.
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No Spectrum Requirement Until Monetisation
Regarding spectrum, the ratings agency commented, "The risk of expensive spectrum purchases by Bharti Airtel in the next 18-24 months has dissipated. Telcos in India are unlikely to pour significantly more resources into 5G until more returns can be reaped. This could happen in case of large, monetisable enterprise use cases for 5G, beyond the current use cases of fixed-wireless access and faster mobile connections."
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Bharti Airtel
Airtel is a global communications solutions provider with over 550 million customers in 15 countries across India and Africa. The company also has a presence in Bangladesh and Sri Lanka through its associate entities. Bharti Airtel is the second-largest provider of telecom services in India.
The promoter group, the India-based Mittal family and Singapore Telecommunications Ltd. (Singtel), jointly own 53.2 percent of Bharti Airtel. Singtel has an effective stake of 29.4 percent while the Mittal family has an effective stake of 23.7 percent, the report noted.
