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Standard & Poor's upgrades outlook on Bharti Airtel

business Updated: Dec 05, 2013 21:49 IST
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Global credit rating agency Standard & Poor's on Thursday upgraded outlook on Bharti Airtel to positive from stable, saying emerging clarity in Indian telecom regulatory environment reduces policy uncertainty.

The agency also assigned 'BB+' long-term issue rating on its guaranteed $1.5 billion senior unsecured notes as well as 750 million euro fund raised by the company through senior unsecured notes this week.

The BB+ rating shows that the company currently has the ability to repay but faces uncertainties, such as adverse business or financial circumstances.

In a statement today, S&P said, "We revised the outlook to positive because we expect Bharti to sustain its improved financial performance over the next 12-24 months."

"We also believe that emerging clarity on India's regulatory framework for telecommunication companies reduces policy uncertainty," it said.

The agency said that it expects Bharti's better operating performance, deleveraging measures, and controlled capital spending to further improve its financial performance.

"We estimate that the company's ratio of funds from operations (FFO) to debt will improve to more than 30% in the fiscal year ending March 2015, from 23.18% in fiscal 2013," the statement said.

S&P sees downward revision of the base auction prices from the initial expected prices for licenses, higher spectrum on auction in the 1800 megahertz band, and new guidelines for mergers and acquisitions as positive regulatory steps.

The rating agency said that it expects Bharti to maintain its capital spending at about 16% of revenues in fiscal 2015.

"A sharp depreciation in the rupee may affect leverage, given that about 80% of Bharti's debt is in foreign currency and carries a floating rate. The company's limited hedging and international operations do not provide a full hedge for its debt, in our opinion," the statement said.