Global rater Fitch today reaffirmed investment grade rating for Bharti Airtel, saying its deal to buy Qualcomm's wireless broadband business will not immediately impact the telecom major's balance sheet.
Last week, Bharti Airtel had announced it will acquire 49% stake in Qualcomm India's BWA entities for $165 million.
Bharti Airtel's long term foreign currency issuer default rating of 'BBB-' with negative outlook is unaffected by its acquisition of US-based chip maker Qualcomm's broadband wireless access (BWA) spectrum assets in India, Fitch said in a statement.
'BBB' is an investment grade rating.
"Although Bharti's rating has limited headroom for a large debt-funded acquisition, the acquisition of 49% stake in Qualcomm's Indian entity does not immediately burden its balance sheet," Fitch Associate Director (Asia-Pacific Telecom Media and Technology team) Nitin Soni said.
Only when Bharti increases its ownership of Qualcomm's BWA Indian entities to 100% by end-2014 will it then have full responsibility to service the entities' outstanding debt, he added.
The negative outlook continues to reflect the adverse effect of India's uncertain regulatory environment, Fitch said, adding that these decisions that may result in higher regulatory cash outflows than its base case assumptions.
"A large regulatory cash outflow coupled with a much earlier-than-expected (prior to FY15) responsibility to service the additional debt at Qualcomm's BWA entities could result in a negative rating action," it said.
The deal is expected to help Bharti Airtel establish a stronghold in fast-growing high speed Internet services, giving it access to lucrative circles of Delhi, Mumbai, Haryana and Kerala.
Bharti Airtel, which had revenues of Rs 71,450 crore and a subscriber base of 25 crore (as of March 2012) had bagged BWA licences in four circles - Kolkata, Karnataka, Punjab and Maharashtra. The high speed data services have already been launched in Kolkata and Bangalore.
Mukesh Ambani-led Reliance Infotel is the only company to have pan-India (22 circles) BWA spectrum for the 4G services. However, it is yet to launch the service.
