Rating Agency Moody’s Predicts A Grim Outlook For Airtel; Downgrades It To Negative Due To Jio’s Aggressiveness
Credit rating agency Moody’s have presented a grim and harsh outlook for Airtel in their latest ratings. Not only have they downgraded Airtel’s rating from stable to negative, they have also predicted slower revenues and lesser subscribers for them in the coming days.
And as per Moody’s, Jio is the only reason for this downslide of Airtel.
Moody’s Tear Apart Airtel’s Growth Story
Early this year, we had reported about Airtel’s massive loss in Q3 of 2017 results, which happened mainly due to Jio’s aggressiveness customer acquisition strategy and their dirt cheap plans.
Moody’s recent credit ratings have taken into account these results, and have accordingly adjusted their rating from stable to normal. As per Moody’s, the pressure on Airtel will continue to build, related to their earnings and subscriber count.
Moody’s said, “We expect Bharti’s profitability to remain under pressure as competition remains at heightened levels over the near-term, as such, we believe that a permanent reduction in leverage to levels more appropriate for the Baa3 rating — such that adjusted debt to EBITDA trends ratio to 3x by June 2017 — is unlikely..”
But Airtel’s Leadership Appreciated
Note here, that Moody’s have not changed Bharti Airtel Ltd’s (Bharti) Baa3 issuer rating and senior unsecured debt ratings, and also affirmed their Baa3 ratings on the senior unsecured notes issued by Bharti Airtel International (Netherlands) BV.
However, the overall outlook on the ratings has been reduced to negative.
Airtel’s Baa3 rating have been left unchanged because of their ‘leadership position, strong spectrum portfolio, and their ongoing commitment to reduce debt.
Moody’s is among the only three credit rating agencies in the world. While Moody’s Investors Service and Standard & Poor’s (S&P) together dominate 80% of the global market in this niche, Fitch Ratings controls a further 15%.
The rating agency’s outlook determines Airtel or any other company’s ability to raise fresh funds or pay off the debts.
As per Moody’s, Airtel needs to do just two things in order to improve their position within Indian telecom market: Maintain & nurture their high ARPUs (Average revenue per user); and increase their customer base at a rapid pace, thereby increasing their overall profits.
As per Moody’s: “Bharti’s ability to expand profitability for its core Indian mobile operations relies on the company retaining its higher average revenue per subscribers while increasing the pace of subscriber acquisitions organically and through acquisitions..”
However, with Jio determined to disrupt the industry, it seems highly unlikely, at least for the next few months.