Fitch affirms Bharti Airtel credit rating at BBB

Credit rating firm Fitch today affirmed Bharti Airtel's long-term foreign currency issuer default rating at 'BBB' with stable outlook, reflecting the firm's ability to repay debt.

"Fitch Ratings has affirmed Bharti Airtel's (Bharti) long-term foreign currency issuer default rating (IDR) and senior unsecured rating at 'BBB'. The outlook on the IDR is stable," Fitch said in a statement.

Credit ratings range from AAA, AA, A, BBB to D where the top rating includes high ability to replay debt and D indicates least.

Fitch said Bharti's BBB rating reflects its established market leadership in the Indian wireless services industry with about 35 per cent revenue market share, diversified operations and holding of large pool of spectrum.
 

"We believe that its established market position and diversified revenue base will help it withstand intense competition in the Indian mobile segment," Fitch said.

The rating agency, however, cautioned that Bharti Airtel's revenue to cash flow ratio may decline as growth in non-mobile segments in India and its African operations may not fully offset the fall in the Indian mobile segment's revenue.

"Competition is likely to remain intense as new entrant Reliance Jio will continue to offer cheaper tariffs to gain market share from incumbents. Blended average revenue per user (ARPU) could remain flat at around Rs 160 as Bharti is unlikely to be able to raise tariffs, given the price competition," Fitch said.

The rating agency has negative outlook on the Indian telecom market as it expects the credit profiles of the top four telcos to come under pressure from tougher competition and greater capex requirements.

According to Fitch, Jio may continue to disrupt the market by offering cheaper tariffs than the incumbents to gain market share.

"Ongoing industry consolidation will leave only five telcos in the market and bring back pricing power to incumbents only after one to two years. However, in the medium term, Jio could raise tariffs to start generating return on its massive investment of USD 27-30 billion," the statement said.