S&P rings in higher ratings for Airtel, assigns BB+

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Singapore, Dec 13: Standard&Poor's (S&P) Ratings Services today raised its corporate credit ratings on India-based telecom operator, Bharti Airtel Ltd to 'BBB-' from 'BB+'. The outlook is stable. This rating action reflects the company's stronger-than-anticipated operating performance and improved cash flow generation supported by greater economies of scale, the ratings agency said.

Despite high capital spending and intense competition, Bharti's credit measures are projected to remain in the current rating category. ''The ratings on Bharti reflect the company's strong subscriber growth and improved cash flow measures,'' said S&P's credit analyst Yasmin Wirjawan.

''These strengths are somewhat offset by the intense competition faced by the company and its aggressive expansion plan, with a budgeted capital spending of 3.3 billion dollars to 3.5 billion dollars annually in the near term.''

Bharti's liquidity is adequate. On September 30, 2007, the company had Rs 500 crore cash balance and Rs 1,100 crore short-term investments, which are sufficient to cover about Rs 1,000 crore of debt due in one year.

In addition, the company had about Rs 6,300 crore equipment payable due in one year, which will be financed by internal cash generation and debt.

The company has unused committed credit facilities of about 250 million dollars and Rs 240 crore.

''The rating or outlook could be under pressure if there is deterioration in Bharti's business risk profile and if its financial profile weakens materially, including debt to EBITDA of 2x and above, after the company's high capital spending to enhance its network capacity and coverage,'' Ms Wirjawan noted.

''On the other hand, the rating or outlook could be raised if the company is able to strengthen its leading market position, while maintaining strong financial metrics, including debt to EBITDA below 1.5x on a sustainable basis.'' In addition, Bharti needs to generate predictable and sustainable positive free operating cash flows, while maintaining adequate liquidity to fund its developments, added Ms Wirjawan.

As most of its revenue is generated in local currency, the company would need to be able to maintain such financial metrics under an economic stress scenario for its ratings to be above the foreign currency sovereign ratings on India (BBB-/Stable/A-3).


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