Airtel-Tata deal beneficial but raises integration risk: S&P Global Ratings

Bharti Airtel's takeover of Tata Teleservices' consumer mobile business will bolster its subscriber and revenue market share but could raise integration risk at a time when the Sunil Mittal-led company is also combining operations with Telenor, S&P Global Ratings has said.

S&P said however that Airtel's rating is "unaffected" by its recently-announced acquisition of the Tata Group firm.

"...in our view, this deal increases integration risk for Bharti because the company will be simultaneously integrating the operations of Telenor India (acquired last fiscal) and Tata Teleservices over the next 12-18 months, while responding to the intense competition," it said.

The S&P Global Ratings note added however that it expects Bharti to be able to manage the integration risk because it has successfully managed such deals in the past, particularly in the African markets.

The deal will be neutral to Bharti's leverage in 2017-18 and 2018-19, it said.

Airtel will assume a small portion of the deferred spectrum liability but not any debt obligation of Tata Teleservices.

"We believe Bharti is committed to maintaining its credit profile and will continue to take steps to contain its leverage within our rating tolerances," it pointed out.

The 'cash free and debt free' acquisition will boost Bharti's India subscriber and revenue market share to 31.9 per cent and 40.6 per cent respectively. The subscriber and revenue market share stood at 27.7 per cent and 34.8 per cent respectively, in the three months ended June 30, 2017.

Like many industry analysts, S&P too believes that the deal will help reduce the gap between Bharti and the new combined force of soon-to-be-merged Idea Cellular and Vodafone India.

However in the same breath it cautioned that market share numbers are prone to significant changes, given the intense price competition in the Indian telecom sector.