Moody’s Investors Service revised the ratings of Bharti Airtel and Bharti Airtel International, its Dutch subsidiary. As per the same, it has been rated from stable to positive as it improved credit metrics and operating performance. Annalisa Di Chiara, Moody’s senior vice president, stated that the outlook change to positive shows that the company is improving the above-mentioned metrics. It was added that if it sustained, then it could get the investment-grade upgrade in the next 12 to 18 months.
Airtel Receives Positive Outlook
This development comes soon after the telco led by Sunil Mittal announced a 20% to 25% increase in the cost of its prepaid plans. As per analysts, this might augment the financials of the company significantly. At the same time, Airtel closed at Rs 759.50 on Tuesday, which is in the high by 2.35% on the BSE.
Di Chiara further stated that the continued expansion into profitability, especially its core Indian mobile business along with a constant reduction in the balance sheet debt are needed to mitigate the possible effect on the company’s credit metrics of investments in 5G technology and the growth of deferred liabilities in the moratorium period.
Prior to this, even the Crisil Ratings pointed out that the tariff hike will let the operator invest in rolling out its 5G services over the medium-term. Furthermore, the firm expects that investments in the 5G spectrum will not worsen the leverage profile of the company in the case of an auction in the first half of next year.
The telecom operator is estimated to spend around Rs 37,000 crore in the 5G spectrum auction. Recently, the telco reported an increase of 27% in the consolidated earnings before taxes, interest, amortisation (Ebitda), and depreciation to Rs 27,200 crore for a six-month period that ended in September 2021 as compared to the same period last year.
Moody’s believes that the consolidated adjusted Ebitda could increase from Rs 57,000 to Rs 58,500 crore by the end of the current fiscal year in 2022, which is an increase of 25%. It added that the government’s telecom reform package would not help in strengthening the cash flow of Airtel but ensure the health of the sector for the long term.