Moody's Upgrades Outlook On Airtel To 'Stable'

Moody's Investor Services on Friday affirmed Bharti Airtel's Ba1 corporate family rating (CFR) while revising the outlook to 'stable' from 'negative' on the back of clarity on the AGR (adjusted gross revenue) dues payment timelines and improved profitability of the telecom company.

"The ratings affirmation and change in outlook to stable reflect improving profitability at Bharti's core Indian mobile business, because of a moderation in industry competition, an increase in its 4G customer base, and a tariff hike from December 2019," Moody's senior vice president Annalisa DiChiara, said in a media release.

DiChiara called the resolution of the staggered payment for AGR dues "a positive development."

Earlier in September, the Supreme Court granted telcos 10 years time to pay their balance AGR dues. Airtel owes Rs 25,976 crore in dues to the government.

Further, Moody's also affirmed Airtel's senior unsecured rating and backed the senior unsecured notes issued by Bharti's arm, Bharti Airtel International (Netherlands) B.V.

The agency added it could upgrade Bharti's ratings if the telco's operating performance improves such that its consolidated leverage is sustained below 2.5x which needs to be achieved in conjunction with a material expansion in profitability at its core Indian mobile business.

Moody's said that competition in India's mobile segment has eased in the last nine months as price wars after the entry of Reliance Jio have now subsided.

It also noted that the pandemic has caused subscriber contraction of around 1-2 percent over the past few months, amplifying the impact of natural attrition of subscribers due to SIM card consolidation.

However, an increase in the composition of Airtel's 4G customers, which rose to 50 percent of India's subscriber base as of June 2020, is helping it stabilise profitability.