Moody's Ratings has upgraded its credit rating and outlook on Bharti Airtel to 'positive' from 'stable', citing the second-largest Indian telecom operators improved financial profile and steadily increasing subscriber market share, as it continues to gain users from third-largest Vodafone Idea Limited.
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Moody's Upgrades Bharti Airtel’s Credit Rating
The ratings agency has affirmed Bharti Airtel's Baa3 issuer rating and the Baa3 senior unsecured debt rating on bonds issued by Bharti. Simultaneously, the agency revised Bharti's outlook to positive from stable.
Moody's added that it "could upgrade Bharti Airtel's rating to Baa2 if there is sustained improvement in the company's profitability, and there are no adverse changes in the regulatory environment in its key operating countries."
"The change in outlook to positive reflects a significant improvement in Bharti's financial profile and its steadily increasing market share, supported by structural changes in India's fast growing mobile sector. Easing competitive intensity and our expectations of a relatively supportive regulatory environment also contribute to the positive outlook," said Nidhi Dhruv, Moody's Ratings Vice President and Senior Credit Officer.
"Bharti's established market position in the resilient Indian telecom industry, solid financial profile with leverage trending towards 2.0x, demonstrated access to capital markets and supportive shareholders position it well to be rated above India's sovereign rating," added Dhruv. "However, the linkages with the Indian economy constrain Bharti to be rated no more than one notch above the sovereign."
Subscriber and Revenue Market Share Growth
Bharti Airtel's subscriber market share has steadily grown to 37 percent in September 2024 from 33 percent in March 2020, as the operator continues to take market share from third operator Vodafone Idea, Moody's said. Bharti's revenue market share will be higher at around 39 percent.
"The affirmation of Bharti's Baa3 ratings reflects its position as one of the two leading operators in India's (India, Government of, Baa3 stable) high-growth mobile market given the favourable demographics, its pan-India network and large spectrum holdings. Bharti is also one of the three largest telecom service operators globally in terms of subscribers (563 million)," the rating agency said in its report.
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Debt Reduction and Financial Discipline
Moody's highlighted Bharti's prudent financial policies are reflective of the sustained improvement in its leverage through debt reduction.
"In particular, the repayment of higher cost deferred spectrum liabilities from cash surpluses has accelerated its deleveraging targets. With prepayment of Rs 200 billion (USD 2.4 billion) of spectrum liabilities during the fiscal year ending 31 March 2025 (FY24-25) alone, Bharti's company's consolidated leverage as measured by adjusted debt/EBITDA will improve to 2.6x at March 2025," the agency noted in its report dated January 22, 2025
It further added that Improving earnings and scheduled debt repayments will further pave the way for leverage to improve to 2.2x by March 2026.
