Bharti's deals with Videocon & ATC are credit positive: Moody's

Moody's Investor Service, the ratings agency, on Tuesday said Bharti's recently announced deals (African tower sale agreement with ATC and spectrum trading pact with Videcon) are credit positive. Bharti Airtel has a Baa3 stable rating. While the details of the sales agreement have not been disclosed, Bharti has committed the proceeds from all tower asset sales to debt reduction, which Moody's views positively.

Earlier, on 17 March 2016, Bharti had announced that it had entered into a definitive agreement with Videocon Telecommunications for a consideration of around Rs 4,430 crore in six circles. Bharti's ongoing monetisation initiatives, including the Tanzania tower sales, will support debt reduction and help mitigate the ultimate effect on leverage metrics of its spectrum acquisition activities.

In a note, Moody's said: "When considering the net effect of these two transactions, the pro forma effect of the deferred spectrum liabilities ($2.8 billion), proceeds received from the closed tower asset sales ($1.7 billion) and the sale of African operations to Orange (Baa1 stable) -- which Moody's estimates at $900 million -- we believe that pro-forma leverage will remain under 3.0x at 31 March 2016, or the end of FY2016."

The spectrum acquisition from VTL is credit positive as it will improve Bharti's network quality and capacity and ultimately enhance its competitive positioning in six circles. It will further enhance Bharti's spectrum holdings, an increasingly important resource as Indian operators focus on 4G rollout. The 4G spectrum is critical for the next growth phase as mobile data increasingly replaces voice as the main growth driver for mobile operators.