Bharti Airtel Equity Issuance to Deleverage, Fund 5G Capex: Fitch

Bharti Airtel Ltd’s planned $2.8 billion equity issuance will improve its Funds from operations (FFO) net leverage to around 2 times and provide funds to strengthen its market position, according to Fitch Ratings.

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Bharti will raise the equity in three tranches, and a quarter of the proceeds to be received upfront and the balance in two instalments within three years.

Bharti’s management remains committed to an investment-grade rating. The company raised about $9 billion in the financial year ended March 2020 (FY20) and FY21 via equity issuance, selling a stake in subsidiary Airtel Africa Plc and the sale-and-leaseback of towers in Africa. The management aspires to achieve a debt-to-EBITDA ratio of around 2 times in the long term.

Fitch forecast Bharti’s capex to increase to about $5 billion in FY22 (FY21: $4.6 billion), of which $1.5 billion is likely to be paid upfront to acquire 5G spectrum assets.

“We believe that the company will also seek to strengthen its fibre infrastructure – connecting towers with fibre and backhaul infrastructure to prepare its network to launch 5G services in 2022-2023. We believe that capex on 5G infrastructure during 2022-2023 will replace 4G investments, as 4G coverage is largely complete,” it said.

Bharti revenue and EBITDA grew by 15% and 30%, respectively, year-on-year in 1QFY22.

Industry ARPU To Rise

Fitch forecasts the industry’s monthly average revenue per user (ARPU) to rise by 15-20% to Rs175 ($D2.4) in the next 12 months (1QFY22: Rs 146), on headline tariff increases and increasing migration of 2G users to higher-priced 4G plans.