Fitch revises outlook on Airtel to negative from stable, affirms at 'BBB-'

Fitch Ratings has revised the outlook on Bharti Airtel's Long-Term Foreign-Currency (FC) Issuer Default Rating (IDR) to negative from stable, affirming it at 'BBB-'.

The rating agency said the outlook change is sovereign-driven, and that projected that Bharti's 2020-21 revenue and Ebitda (earnings before interest, taxes, depreciation, and amortisation) will remain robust, fuelled by improvement in the Indian wireless market and continued growth momentum in African markets, despite the effect of the coronavirus pandemic.

Fitch, last week, lowered India's sovereign rating outlook to 'negative' from 'stable', saying the coronavirus pandemic has significantly weakened the country's growth outlook. It, however, retained the lowest investment grade rating of 'BBB-'.

"Fitch Ratings has revised the outlook on India-based Bharti Airtel Limited's (Bharti) Long-Term Foreign-Currency (FC) Issuer Default Rating (IDR) to negative from stable, and affirmed the IDR at 'BBB-'," it said in a statement on Monday.

Fitch said it has also affirmed Bharti's senior unsecured rating and Bharti Airtel International (Netherlands) B.V.'s senior unsecured guaranteed bonds at 'BBB-', and Network i2i subordinated perpetual bond's rating at 'BB'.

"The negative outlook follows our revision of the outlook on India's Long-Term Foreign-and Local-Currency IDRs to negative from stable on June 18, 2020. Bharti's FC IDR and senior issue ratings are not directly constrained by India's sovereign rating but cannot exceed the country ceiling (BBB-), which reflects the transfer and convertibility risks associated with FC obligations," the statement said.

It added that should the sovereign IDRs be downgraded, the country ceiling may also be revised down in tandem, which would constrain Bharti's FC IDR and senior issue ratings to 'BB+'.

"The change in the outlook does not indicate a change in our view of Bharti's underlying credit profile, but rather reflects the heightened probability that India's country ceiling could be lowered to 'BB+' , which would then constrain Bharti's FC IDR and senior issue ratings," it said.

The rating agency forecast that Bharti's FY21 revenue and Ebitda growth will remain robust at around 10-15 per cent, driven by improvement in the Indian wireless market and continued strong growth in African markets, despite the effect of the coronavirus pandemic.

"However, the growth will be slower than our previous expectations of 20-22 per cent, due to lower data growth and weaker economic activity amid the pandemic in India and Africa," it said. On the issue of regulatory dues payment, Fitch said it assumes the balance demand of USD 2.3 billion to be paid in its 2020-21 leverage estimates.