This comes after Bharti Airtel posted a net profit of Rs 854 crore in the October-December quarter after nine quarters of sequential losses. Gurugram-based telco’s revenues increased 26% to Rs 26,518 crore on-year.
Another industry-wide tariff hike like the one implemented in December 2019, according to Moody’s, is necessary to drive a further substantial improvement in cash flow generation and ultimately debt reduction and leverage.
Consequently, the higher profitability of Bharti Airtel’s Indian mobile services revenue drove 53% of consolidated EBITDA, a credit positive, the agency said.
“Together with the healthy growth of its African operations Airtel Africa plc, which accounted for 28% of consolidated EBITDA, Bharti’s consolidated EBITDA grew 34% year on year, helping to contain adjusted leverage at around 4.0x, in-line with our expectations,” according to Moody’s
Furthermore, the EBITDA of telco’s Indian mobile services segment accounts for a 23% increase in average revenue per user (ARPU) to Rs 166 as against Rs 135 a year ago.
The ARPU for this segment, according to the rating agency, has been sequentially climbing up following the rollout of minimum recharge plans and industry-wide tariff hike.
“At the same time, customer migration to the higher-priced data segment coupled with strong 4G net customer additions, which increased by 34% year on year, has helped to boost ARPUs,” it added.On the upcoming March spectrum auctions, Moody’s said it expects the telco to bid to maintain quality of services to stay abreast with the competition and to renew some licenses which are set to expire in September.
Bharti Airtel ended the fiscal third quarter with nearly 308 million mobile phone users in India. On a consolidated basis, the telco had almost 458 million users. It added a staggering 13 million subscribers during the quarter.
“Airtel Africa plc also needs to refinance senior unsecured notes of €750 million maturing in May 2021, which are guaranteed by Bharti,” it added.
Bharti’s adjusted leverage declined to around 4.0x at end December 2020 from 4.8x at end March 2020 on the back of improving profitability of its core Indian mobile business. We expect adjusted leverage will move towards 3.5x by March 2022, barring any material debt funding of the spectrum.
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