Airtel could spend $ 1.5 billion on upfront 5G auction payment next fiscal year: Fitch

Global rating agency Fitch expects Bharti Airtel’s overall investments to reach around $ 5 billion in FY22, which it estimates the Sunil Mittal-led phone company will spend $ 1.5 billion on. of dollars for the initial payment of the 5G waves acquired at the next auction, probably around April 2022.

The global agency also confirmed Airtel’s long-term foreign currency issuers (IDR) default rating of “BBB—”, but assigned a “negative outlook” to it. Fitch, however, clarified that the “negative outlook” is triggered by a possible downgrade of India’s sovereign rating, and does not reflect his views on Airtel’s underlying credit profile, which “improved”, driven by “strong growth in its India and Wireless Operations in Africa.

“Fitch predicts that Bharti’s investments will increase to around $ 1.5 billion in FY22 (FY21: $ 4.6 billion), of which $ 1.5 billion is expected to be prepaid for acquire the 5G spectrum assets… the company will also seek to strengthen its fiber infrastructure to prepare its network. to launch 5G services in 2022-2023, ”the global rating agency said in a press release on Thursday.

Bharti’s investments in 5G infrastructure in FY23, he said, would replace his current 4G investments, as 4G coverage is largely complete ”.

Fitch added that unless “a one-time payment for 5G spectrum, Bharti is likely to generate positive free cash flow in FY 22 on a higher generation of EBITDA, which should be sufficient for fund basic investments, higher interest charges and higher taxes. ”

Telecommunications Minister Ashwini Vaishnaw recently said the next sale of spectrum will take place in the second quarter of the 2022 calendar.

Fitch said the negative outlook on the phone company’s IDR is due to the “increased likelihood that India’s national cap of ‘BBB-‘ could be lowered to ‘BB +’, which” would constrain Bharti’s IDR and the ratings of senior issues at BB + “.

The global rating agency said that although Bharti’s IDR and senior ratings are not directly linked by a sovereign rating, they “cannot exceed the country’s cap, which reflects the transfer and convertibility risks associated with foreign currency bonds “.

Fitch, however, estimates that Bharti’s revenue for fiscal 22 “will grow 10% to 12% and EBITda 20 to 22%, thanks to the improvement in its wireless market in India and the strong growth of African markets ”. It also predicts the telecommunications company’s net funds from operations (FFO) leverage for fiscal 22 to be “1.8x to 2.0x in fiscal 22, well below 2.5x threshold ”, beyond which it would take negative rating actions.

Fitch also confirmed its overseas branch, Bharti Airtel International (Netherlands) BV senior unsecured secured bonds at “BBB-” and the Mauritius branch 100% owned by the telecommunications company, perpetual subordinated bonds. from Network i2i to “BB”.

The global rating agency expects India’s two largest telecoms operators, Reliance Jio and Bharti Airtel, to increase their combined revenue (RMS) market share to 80% -82% in 2022, from around 77% -78% in June 2021.

Earlier this week, Bharti said he would increase all prepaid rates by up to 25% from November 26 in a bid to increase Average Revenue Per User (ARPU) and improve his financial health.

Analysts believe the long-awaited rate hikes – effective from November 26 – on prepaid plans will immediately trigger a 6% increase in Airtel’s ARPU from Rs153 at the end of September and an 8% increase in profit before interest, taxes, depreciation and amortization (Ebitda) during FY22, as the gains will start to be felt from the fiscal fourth quarter itself.

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