Telenor India buy won't affect Airtel's financial position: S&P

Acquisition of Telenor's India operations will help telecom giant Bharti Airtel improve its market and spectrum position without any material increase in debt, S&P Global Ratings has said.

S&P Global Ratings' rating on Bharti Airtel (BBB-/stable/--) is unaffected by the company's plans to acquire the India operations of Telenor ASA, it said in a statement. Generally, BBB indicates relatively lesser credit risk and exhibits adequate protection parameters.

"The acquisition, which is subject to regulatory approvals, will help Bharti Airtel improve its market and spectrum position without any material increase in debt," it added.

Last week, Bharti Airtel had said it will acquire the business of Telenor India for an undisclosed sum in all seven circles where the latter holds spectrum. Airtel is India's largest wireless operator with over 269 million subscribers and a revenue market share of over 33 per cent.

As the new owner, Airtel will take over Telenor India's spectrum, licences and operations, including its employees and customer base of 44 million. The acquisition, if successful, will help Bharti Airtel consolidate its market position and increase its revenue market share by about two percentage points to about 35 per cent, S&P said.

The deal will add 43.4 MHz of spectrum for Bharti Airtel in the liberalised 1,800 MHz band to provide fourth generation (4G) services in seven circles. "However, it will not significantly change Bharti Airtel's leading business position, especially in the Indian telecom market, where the company has large and diversified operations," S&P said.

The acquisition will have an "immaterial impact" on Bharti Airtel's financial position because of the limited rise in debt and gains in revenue and profit, it added. The increase in debt will be on account of outstanding dues of about Rs 1,600 crore for Telenor's spectrum, to be paid over the remaining amortisation period.

"We still expect Bharti Airtel's ratio of funds from operations to debt to remain at 20-21 per cent in the fiscal year ending March 31, 2018, resulting in limited financial headroom for the rating. We continue to believe that Bharti Airtel remains committed to deleveraging," S&P said.

Bharti Airtel is working on the possible sale of stake in its tower company, Bharti Infratel. At the same time, competition in the Indian wireless market remains intense. The recent announcement by Reliance Jio to start charging for its services starting April 1, 2017, is expected to help develop the industry further.