S&P revises outlook on Airtel to negative

New Delhi: S&P Global on Thursday revised its rating outlook on Bharti Airtel  to negative from stable due to weaker financial performance in FY18 — a result of cut-throat pricing in the wireless market.

S&P said Bharti’s leverage is further constrained by higher capex during FY19. “We affirmed our ‘BBB-’ long-term issuer credit rating on the India-based wireless telecom company. We also affirmed our ‘BBB-’ long-term issue rating on Bharti’s senior unsecured notes,” it said.

S&P said that the negative outlook reflects a one-in-three possibility that it may downgrade Bharti over the next 12-18 months “if its business performance does not improve in line with our expectations or if deleveraging does not materialise, and the ratio of funds from operations (FFO) to debt remains below 20 per cent.”

“We affirmed our ratings because we expect Bharti’s financial performance to improve over the next 12-24 months owing to the company’s stabilising India wireless business and higher profitability in the Africa business. We also expect Bharti to merge Telenor (India) and Tata Teleservices in FY19, adding 5 per  cent–8 per cent to its revenue,” said S&P.

The agency said that it revised the outlook to reflect the risks associated with a recovery in Bharti’s financial leverage over the next 12-24 months. “We expect the India-based wireless telecom company’s performance to gradually recover over the next 12-24 months. However, we see risks associated with such recovery,” it said.

S&P said that it view an aggravation in price competition without any meaningful reduction in capex as key risks to a recovery in Bharti’s financial performance.