Moody’s on Tuesday changed its outlook on Bharti Airtel’s issuer rating and senior unsecured debt ratings, and its ratings on senior unsecured notes, to negative from stable. Giving the rationale behind the downgrade, it said that while Bharti recorded a 4.3% growth in reported consolidated Ebitda year-on-year at March 31, 2017, the effects of intense competition in the Indian mobile services segment were particularly evident in the fourth quarter, as revenues and reported Ebitda for its India mobile services segment fell 11% and 19%, respectively.
The Indian telecom market will witness intense competition over the next one year as the new entrant Reliance Jio Infocomm will aggressively pursue subscriber acquisition as well as go after expanding its share of data market, Moody’s said.
“Intense competition will persist over the next 12 months as we expect RJio will remain aggressive in acquiring new subscribers and growing the data market. Bharti’s ability to expand profitability for its core Indian mobile operations relies on the company retaining its higher Arpu subscribers, while increasing the pace of subscriber acquisitions organically and through acquisitions,” Moody’s said.
It said that it expects intense price competition over the next several quarters in the Indian telecom sector, as operators, such as Bharti Airtel, implement plans and tariffs to protect and grow their market shares. “This competition will occur even though ongoing and transformative consolidation in the sector and Jio tariff plan will help stabilise the industry’s average revenue per user (Arpu) over the longer term,” it added.
Overall, Moody’s expects Bharti’s consolidated adjusted Ebitda to contract around 5% year-over-year, reflecting the competitive pressures existent in the Indian mobile segment and somewhat offset by the stable operating performance of its African operations and its other business segments in India.