'Airtel's weak Q3 credit negative, no immediate rating impact'

Ratings agency Moody's Investors Service today said Bharti Airtel's weak operating results for December quarter are "credit negative" but will not have any immediate effect on the telecom major's rating and stable outlook.
Airtel -- which has a Moody's rating of Baa3 stable -- reported over 54 per cent fall in consolidated net profit to Rs 503.7 for October-December 2016 quarter due to "turbulence" from "predatory pricing" of newcomer Reliance Jio.
"The slowdown in Bharti's India operations - which contributes around 85 per cent of consolidated EBITDA - was significant quarter-over-quarter (q-o-q), with a 6.3 per cent contraction in revenues and 11.8 per cent decline in EBITDA to Rs 72.5 billion," Moody's Vice President and Senior Credit Officer Annalisa Di Chiara said.

This primarily reflects decline in average revenue per user (ARPUs) across mobile services (voice and data) as well as a 12.4 per cent drop in data customers q-o-q as Reliance Jio continued to drive intense price competition, she added.
"Still this elevated leverage can be accommodated in the rating for a short period of time. We still expect cash flow from operations and monetisation opportunities -- including divestments in subsidiaries -- to reduce absolute debt levels permanently to expedite deleveraging towards 3.0x," Di Chiara said.
The company has no headroom for any delay in its deleveraging plans, she added.

Bharti Airtel has sought shareholder approval for issuing non-convertible debentures (NCDs) via private placement.

"The stable outlook reflects Moody's expectation of stable cash flow generation for its Indian operations and the application of the cash proceeds from its monetisation activities will reduce debt on an absolute and relative basis," it said.
The agency added that downward pressure could also arise if competition intensifies further in any of its key markets, but particularly for the Indian wireless business, such that its key operations and/or subsidiaries report materially declining margins.
Bharti Airtel is the third-largest operator globally based on total number of subscribers. As of December 2016, it had more than 365 million customers across its operations. It has operations in 18 countries across South Asia and Africa.