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Standard & Poor's today revised its outlook on telecom major, Bharti Airtel to positive from stable due to beneficial regulatory developments. The rating agency expects that it will be able control its capex and licence renewal costs.
“Downward revision of the base auction prices from the initial expected prices for licenses, higher spectrum on auction in the 1800 megahertz band, and new guidelines for mergers and acquisitions are positive regulatory steps, in our opinion,” the agency said, in its report.
“We also expect greater clarity to emerge on India's regulatory framework, particularly regarding license renewal,” said Abhishek Dangra, credit analyst at Standard & Poor's. The rating agency also affirmed their 'BB+' rating on its long-term corporate credit.
According to S&P's estimates, the company's ratio of funds from operations to debt will improve to more than 30% in the year ending March 2015. It is currently at 23.18%.
Bharti's good market position and diversity with above-average regulatory risks in its key markets, reflects its 'satisfactory' risk profile. Regulatory uncertainties however pose risks. It is already contesting multiple issues of the company like one-time spectrum fees, and restrictions on 3G roaming arrangements with other operators.
“We may raise the rating if regulatory uncertainty in India diminishes, supporting industry fundamentals,” said Dangra. Bharti's financial risk profile is also satisfactory after its $1 billion debt prepayment which it did after selling of its stake to Qatar Foundation Endowment.
