Telecom reforms package credit-positive for Airtel, Jio : Moody's

Moody’s Investor Service has said the telecom reforms package is credit positive for Bharti and Reliance Jio as it will free up cash flows for reinvestments in existing networks, drive investments in 5G rollouts and retain the industry’ three- private players market structure.

“The reforms are credit positive for Indian telecom companies, including Bharti Airtel (Ba1 stable) and Reliance Jio, the telecom arm of Indian conglomerate, Reliance Industries (Baa2 negative), because they free up cash flow for reinvestment, enable further investment in next-generation technologies and provide support for a three private plus one state-owned telecom operational structure,” Annalisa DiChiara, Moody’s senior vice president, said in a media statement Friday.

Earlier this week, the government cleared a four-year moratorium on adjusted gross revenue (AGR) and spectrum payments, approved redefining AGR to exclude ‘non-telecom’ revenues and cut the spectrum usage charge (SUC) to zero — both prospectively. These steps are primarily expected to help cash strapped

(Vi) survive.

Bharti Airtel chairman Sunil Mittal has said India’s second largest telco will opt for the four-year deferred option for AGR and spectrum payments. Jio is yet to take a call.

“Should Bharti opt for the moratorium on payments for past spectrum purchases and AGR statutory fees, it could free up around INR120 billion-INR130 billion of cash flow annually, which could be used to reduce debt further,” Moody’s said.

The global ratings agency added that Bharti’s leverage “has been improving over the last 12 months on the back of better profitability” of its core Indian mobile business and capital interventions.

See also  Restricting air traffic between India and Germany hurting both economies: Lufthansa CEO

“Bharti’s leverage — as measured by Moody’s adjusted debt (including perpetual securities )/EBITDA — has fallen to 3.7x for the 12 months ended June 2021 from 4.3x for the comparable period in 2020,” the global ratings agency said.

It added that this improvement is in line with Moody’s expectations of leverage of 3.5x-4.0x by September 2021.



Please enter your comment!
Please enter your name here