Moody's Affirms Bharti Airtel’s Ratings; Expects Leverage To Improve

Moody's Investors Service affirmed Bharti Airtel Ltd.'s Baa3 ratings and said the telecom operator’s consolidated leverage will likely improve to 2.8x in the current fiscal year ending 31 March 2024 (FY24) from 3.1x a year earlier.

Bharti Airtel’s consolidated leverage, as measured by adjusted debt/EBITDA, is likely to steadily improve on the back of improving earnings, repayment of scheduled debt maturities and prepayment of spectrum liabilities with surplus cash, Nidhi Dhruv, a Moody's vice president and senior credit officer, said in a statement.

Dhruv, who is also Moody's lead analyst for Bharti Airtel, expects the company’s consolidated leverage to further improve to 2.5x in FY25.

The rating agency said the telecommunications service provider, which has been opportunistically prepaying its deferred spectrum liabilities with surplus cash, has prepaid 163 billion rupees ($2 billion) of spectrum debt in FY24.

Moody's affirmed Bharti Airtel’s Baa3 issuer rating. It also affirmed the Baa3 senior unsecured debt rating on the bonds issued by Bharti Airtel, as well as on the backed senior unsecured notes issued by Bharti Airtel International (Netherlands) B.V.

RATINGS RATIONALE

The affirmation of Bharti Airtel’s ratings reflects its leading market position in the high-growth Indian mobile market, pan-India network and strong spectrum holdings according to Moody's.

“The company's proven ability to access capital markets and the benefits of a strong and supportive shareholder base also boost its credit profile," Dhruv said.

Moody's expects Bharti Airtel to continue its growth trajectory, especially with competition easing in India and increasing mobile penetration in Africa.

On a consolidated basis, Moody's expects Bharti Airtel’s revenue to grow 8%-11% and its EBITDA to increase 11%-12% over the next two-to-three years as the company benefits from its market leading positions in high-growth markets. Nonetheless, its African business results will remain susceptible to foreign exchange fluctuations, it said.

As of 30 September 2023, the company had around 540 million customers across operations in 17 countries in South Asia and Africa, according to the statement.

CAPEX INTENSITY

Moody's said following the 5G spectrum purchase in August 2022, Bharti Airtel began to ramp up its capital expenditure to enhance its 5G infrastructure along with densifying its 4G network coverage.

The company's adjusted capex intensity, as measured by adjusted capex/revenue, was 31% in 1HFY24, but the 5G capex spending should ease over the next one to two years.

Moody's, which maintained the stable outlook on ratings, expects capex intensity to reduce to 24%-26% in FY25-26.

The rating agency said Bharti Airtel has an excellent liquidity profile with staggered debt maturities, such that the majority of its debt comes due between 2027 and 2032. The company also retains very strong access to bank and bond markets, it added.

Moody's said its stable outlook reflects Bharti Airtel's improving operating and financial profile, including expectation of its credit metrics remaining well within the rating tolerance level.

Note: $1 = 83.0737 Indian rupees

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