Bharti Airtel’s cash flows will grow for 2 years after 5G spectrum purchases too: Moody’s

• Rating agency Moody’s Investors Service has upgraded Bharti Airtel’s rating citing improving operational metrics.
• The telecom operator’s two-fold jump in March quarter net profit at ₹2,008 crore is among the positives.
• Bharti Airtel’s financial performance is expected to remain stable even after funding in the upcoming 5G auction.

Rating agency Moody’s Investors Service upgraded Bharti Airtel’s rating to Baa3 along with changing the outlook to ‘stable’ from positive.

“Bharti’s Baa3 rating considers the company's position as one of the largest telecom service operators globally in terms of subscribers (491 million), its solid market position in India's high-growth mobile market and its large spectrum holdings,” said the rating agency.

Bharti Airtel’s pre-tax profits will grow by 15-20%: Moody’s
The telecom operator’s two-fold jump in the March quarter net profit at ₹2,008 crore aided by increasing average revenue per user and an exceptional gain is among the positives. Further, Moody's expects a further 15%-20% increase in Bharti's consolidated pre-tax profits by the end of fiscal 2023, reflecting stable growth at its Indian operations and African operations.

Airtel has come a long way from turning its losses of ₹12,364 crore ($1.5 billion) in FY20 to a profit of ₹8,305 crore ($1 billion) in FY21.

Entities given Baa3 ratings are considered medium grade and are subject to moderate credit risk and the firm has an acceptable ability to repay short term obligations.

Gradual tariff increases add its stability
The rating agency expects Bharti Airtel’s profitability to improve with growing cash flows over the next 1-2 years even after its expenses towards buying 5G spectrum. This is aided by the telecom operator’s calibrated moves to increase tariffs gradually.

Reliance Jio has been losing subscribers for three consecutive quarters as it increases tariffs on mobile data. Overall, for the financial year 2021-22, Jio’s subscriber numbers are down by 16 million.

Bharti Airtel is present in 16 countries across South Asia and Africa with a customer base of 491 million users out of which 360 million are from India. The third player - debt laden and loss making Vodafone Idea - has also een losing market share.

Airtel even earns more money per user than Jio

Bharti Airtel’s average revenue per user (ARPU) in January to March quarter was earning ₹178, which is ₹10.4 rupees more than that of Reliance Jio’s ₹167.6 per user.

This could also be because Jio’s tariffs are still cheapest among the three biggest players.

Further, the telecom companies Reliance Jio, Airtel and Vodafone Idea are reportedly planning on increasing prices once again after up to 25% in November 2021. The increased prices will reportedly push Airtel’s ARPU to around ₹200. Jio and Vodafone’s Idea’s ARPU is expected to increase to ₹185 and ₹135 respectively — all leading to improving margins in the sector.


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