Bharti Airtel, India's second-largest telecom operator, has received a positive rating upgrade from S&P Global. The rating of the company has been upgraded from BBB- to BBB. The positive upgrade comes owing to the market competition and the continued growth of the telco. The analysts at S&P Global expect Airtel's growth momentum to continue due to the market structure. Airtel has continously deleveraged its books and at the same time improved revenues, average revenue per user (ARPU), and grew its subscriber base.
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The next 24 months should be full of growth for Bharti Airtel, believes S&P Global. The growth will not only be fueled by the Indian operations, but will also come from the African market. The ratings firm expects the telco's Africa business to remain around 20% of the consolidated earnings through fiscal 2027. Airtel Africa PLC's operating performance should remain strong, with 8-10% annual growth in the customer base and ARPU over the last three years. Airtel Africa is also doing good with the Airtel Money, a digital finance business in the continent.
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The ratings firm believes that Airtel's reported EBITDA will triple in fiscal 2026, compared with a decade ago. The next 12-24 months should be positive for the telco as per S&P Global. The company's FFO-to-debt ratio is expected to improve toward 45% over the period. However, there are a few scenarios wherein Airtel's ratinng could be lowered.
If Airtel undertakes debt funded investments or capex that are beyond the expectations of S&P Global or if the competition intensifies in India or if there's a drag from the Airtel Africa business. There are also scenarios wherein there could be more upsides for Airtel, such as a tariff hike which could boost the ARPU To Rs 300 or if the adjusted EBITDA margins improve to about 60%.
