According to Moody’s, competition in telecom sector to remain intense over the next 12-18 months as leading operators will look to protect and grow market share.
While consolidation activity is positive for the industry in the long-term, we still expect competition to remain intense over the next 12-18 months as leading operators — like Bharti, Vodafone India, and Reliance Jio Infocomm Limited – look to protect and grow market share,” the firm said.
Last week, Bharti Airtel Limited announced that it had agreed with Tata Teleservices Limited (TTSL) and Tata Teleservices Maharashtra (TTML).
“The acquisition will strengthen Bharti’s spectrum holdings and add around 40 million subscribers to the company’s leading market position in India’s highly competitive mobile telecommunications market, a credit positive,” says Annalisa Di Chiara, a Moody’s Vice President, and Senior Credit Officer.
Bharti will take over Tata’s mobile operations in 19 circles, including the transfer of all assets (including spectrum) and customers, on a debt-free cash-free basis.
This is a non-cash deal and although Bharti will take over a small portion of deferred spectrum payments we do not expect it will have a material effect on the company’s consolidated leverage. According to the announcement, Tata will retain its stake in Viom Networks, an independent telecommunications infrastructure company, and take care of the associated liabilities,”added Di Chiara, also lead analyst for Bharti.
However Moody pointed out that, the rating outlook is negative as we expect adjusted debt/EBITDA to remain elevated through 31 March 2018, barring any further significant debt reduction from additional efforts to monetize its assets.
Furthermore, any unexpected adverse regulatory developments in any of Bharti’s key markets will also be negative for the rating.
We would also view negatively any event risk associated with a sizeable debt-financed acquisition or other corporate activity that negatively impacts the company’s existing or targeted leverage ratios.
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