Bharti Airtel may not bid for spectrum in the 700 Mhz band in the upcoming mega spectrum sale, due to given the high indicative price for this spectrum, limited device availability and the company's ownership of alternative spectrum (1800MHz/2300MHz) to roll out 4G services, according to ratings firm Fitch. Airtel has already conveyed that the spectrum price in the 700 Mhz, which is the most efficient and stable to offer high-speed data 4G services, is steep, and is not affordable.
The Indian government is looking at selling spectrum in the 700 Mhz, along with a slew of other bands in the upcoming auction, which is likely to take place in July. The ratings firm said that the competition could intensify as Reliance Jio, part of Reliance Industries Ltd, may offer cheaper and faster data services starting second half of this year as it is backed by sufficient spectrum assets and access to funds.
“We forecast Bharti's FY17 operating EBITDAR margin to decline by 100bp due to higher competition in its Indian operations. The full effect on Bharti's profitability could materialise only in FY18 when Jio is likely to be able to offer its services on a pan-India basis. Also, we think that Bharti could realise some benefits of higher data usage, which could partially offset the potential tariffs declines,” the firm said.
Fitch said that Bharti's revenue may grow by mid-single-digit percentage in FY17 despite blended average revenue per user (ARPU) in its Indian operations could fall by 5%-6% to Rs 185 or $2.7 (FY16: Rs194) as Jio's entry will arrest the rise in data ARPU. “Voice ARPU will continue to fall on cannibalisation by rising data usage,” it said.
Fitch Ratings has affirmed Bharti Airtel’s Long-Term Foreign-Currency Issuer Default Rating (IDR) and senior unsecured rating at 'BBB-'. The agency has also affirmed the ratings on Bharti Airtel International (Netherlands) B.V's bonds.
At end-March 2016, Bharti's cash and equivalents balance of $1.6bn was sufficient to cover its maturing debt of $980m and $660m in FY17 and FY18 respectively. “We expect Bharti to refinance its FY19 and FY20 debt maturities totalling about $3.2bn. Its access to capital is solid as demonstrated during FY14-FY15 when it tapped capital markets multiple times and raised an aggregate of $2.3bn,” Fitch said.