Moody’s changes Bharti Airtel’s outlook to ‘positive’ from ‘stable’

Ratings agency Moody's has changed Bharti Airtel's outlook to positive from stable on improving operating performance and credit metrics.

The positive outlook reflects Airtel's improving operating profile credit metrics, including Moody's expectation of growing free cash flows and liquidity over the next 12-18 months, particularly at the core Indian operations.

"If the improving operating performance can be sustained, it could support an upgrade to investment grade within the next 12-18 months," Moody's said in a statement.

Seeking to end years-long low tariff regime, Bharti Airtel on Monday announced hiked tariff plans for prepaid customers.

On Tuesday, Bharti Airtel shares were up over 2% to close at ₹758 on NSE.

The entry-level tariffed voice plan has been hiked by about 25%, while for unlimited voice bundles the increase in most cases is about 20%.

The company said it has always maintained that the mobile Average Revenue Per User (ARPU) needs to be at ₹200 and ultimately at ₹300 to provide a reasonable return on capital that allows for a financially healthy business model.

"We also believe that this level of ARPU will enable the substantial investments required in networks and spectrum. Even more important, this will give Airtel the elbow room to roll out 5G in India," Airtel said in a statement.

"The continued expansion of profitability, particularly at its core Indian mobile business, together with a steady reduction in its balance sheet debt, is needed to mitigate the potential effect on Bharti's credit metrics of significant investments in 5G and the compounding growth of deferred liabilities during the moratorium period," said Annalisa Di Chiara, a Moody's Senior Vice President.

Moody's said it also expects consolidated adjusted debt/EBITDA to steadily decline, even with investments in 5G spectrum, and that cash flow savings from the moratorium are redeployed to reduce debt permanently.