Fitch places Bharti on rating watch negative

New Delhi: Fitch Ratings has placed Bharti Airtel Ltd on 'rating watch negative' over unpaid regulatory dues arising from a recent Supreme Court ruling.

Fitch placed Bharti's 'BBB-' Long-Term Foreign-Currency Issuer Default Rating (IDR) on Rating Watch Negative (RWN) as well as its and Bharti Airtel International (Netherlands) BV's senior unsecured bonds and Network i2i's subordinated perpetual bonds on RWN.

"The RWN reflects uncertainty on the amount and timing of unpaid regulatory dues, after India's Supreme Court ruled on October 24 in favour of the country's Department of Telecommunication's (DoT) definition of adjusted gross revenue (AGR)."

"This led to DOT's demand that Bharti pay unpaid dues on licence fees of $3 billion. There may be another potential demand of $2.9 billion in regard to unpaid dues on spectrum usage charges," Fitch said in a statement.

The resolution of the RWN, which may take more than six months, requires clarity on the exact amount and timing of the payment of unpaid dues and whether the government will provide any financial relief to the telecom sector affected by the court ruling, it said.

Fitch estimated that Bharti's funds from operations (FFO) adjusted net leverage could worsen to around 3.1x-3.4x for the financial year ending March 2020 (FY20, earlier estimate of 2.0x-2.2x) -- excluding $6.3 billion in deferred spectrum costs -- if the company had to pay entire estimated unpaid dues of $5.9 billion, funded out of debt.