Q4 results: Moody’s affirms Baa3 rating for Bharti Airtel and stable outlook

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Moody's Investors Service said that it continues to support Bharti Airtel’s Baa3 rating and stable outlook post the telco’s operating performance for the fourth quarter of the financial year ended 31 March 2016.


"The strong momentum in Bharti's Indian businesses continues to support its Baa3 ratings. Moreover, as tower asset proceeds -- totaling $1.8 billion received to date - will be used for debt reduction, its credit metrics will remain in line with our expectations," Annalisa Di Chiara, a Moody's Vice President and Senior Credit Officer, said in a statement.

Moody's estimates Bharti's adjusted, consolidated debt/EBITDA, including deferred spectrum payments as debt, was around 3.1x for the year ended 31 March 2016, compare to 2.8x last year reports Economic Times.

“Even when considering the net effect of Bharti's announced spectrum acquisitions -- Videocon Telecommunications and Aircel-- with its announced sale of operations in Burkina Faso and Sierra Leone to Orange (Baa1 stable) and tower asset sales in Tanzania, we estimate pro-forma leverage for the year ended 31 March 2016 was also around 3.1x,” the ratings firm said.

The firm said that the stable outlook reflects its expectation of strong cash flow generation from its Indian operations and the application of cash proceeds from its asset sales to reduce debt on an absolute and relative basis.

“Downward pressure could arise should competition intensify in any of its key markets, but particularly for the Indian wireless business, such that its key operations and/or subsidiaries report materially declining margins, or if Bharti fails to continue with its deleveraging strategy,” Moody’s said.

The ratings firm said that any unexpected adverse regulatory developments in any of Bharti's key markets will also be negative for the rating. Bharti’s s consolidated revenues were up 8.4% year-on-year to around Rs 250 billion ($3.7 billion), while revenues from India -- the largest contributor -- were up 9.9% over the same period.

For the full year ended 31 March 2016, the company reported consolidated revenue growth of 4.9% to around Rs 965 billion over the previous year, also led by solid growth in India. In India, on a reported basis, mobile services revenue grew 9.2% year-on-year in 4Q 2016, reflecting the robustness of voice demand and a growing data segment in the quarter. Mobile data revenue was up 44.5% in 4Q 2016 -- reflecting a growth of 25.5% in data customers and 69.4% increase in traffic year-on-year.

Data contributed 23.3% of mobile segment revenues compared to 17.6% in the same quarter last year. Bharti's key business lines in India all reported healthy quarterly year-on-year improvements, with EBITDA increasing to RS77 billion from RS68 billion in the same quarter last year.

EBITDA margins for the Indian operation also improved to 42.2% from 40.7% year-on-year. At the same time, Bharti's African operations -- accounting for approximately 26% of total revenues -- reported a 5.9% year-on-year increase in revenue on a constant currency basis and adjusted for the impact of divestment of its tower assets. But on a reported currency basis, revenues were up 4.5% year-on-year driven by strong momentum in data revenues (up 43.1% year-on-year).

Moreover, EBITDA margins for the African business increased to 22.1%, a 1.3% year-on-year improvement, which we view positively.

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Telecom Analyst

Passionately following the Indian #Telecom Industry for over a decade from Business, Consumer and a Technical perspective. My primary focus area is Consumer & Digital Experience.

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