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4G services don't change Airtel's fate

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CIOL Bureau
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MUMBAI, INDIA: Even after rolling out 4G services and buying out 49 percent stake in Qualcomm's broadband wireless access (BWA) spectrum assets, Bharti Airtel remains unimpressive to Fitch Ratings.

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According to Fitch Ratings, Bharti Airtel Limited's Long-Term Foreign-Currency Issuer Default Rating of 'BBB-' with negative outlook is unaffected by its acquisition of US-based chip maker Qualcomm's broadband wireless access (BWA) spectrum assets in India.

"Although Bharti's rating has limited headroom for a large debt-funded acquisition, the acquisition of a 49 percent stake in Qualcomm's Indian entity does not immediately burden its balance sheet," says Nitin Soni, Associate Director, Fitch's Asia-Pacific Telecom, Media and Technology team.

"Only when Bharti increase its ownership of Qualcomm's BWA Indian entities to 100 percent by 2014-end will it then have full responsibility to service the entities' outstanding debt," adds Soni.

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Earlier this month, prior to Bharti announced its fourth quarter results, the Singapore-based Fitch Ratings had affirmed the telco's long-term foreign currency Issuer Default Rating (IDR) at ‘BBB-‘and predicted a negative outlook for the telco.

“BWA will contribute minimal revenue to Bharti in the next two years as the 4G infrastructure is still developing,” Fitch believes.

A large regulatory cash outflow coupled with a much earlier-than-expected (prior to FY15) responsibility to service the additional debt at Qualcomm's BWA entities could result in a negative rating action, the agency states.

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Qualcomm's BWA stake has cost Bharti around $165 million as upfront cash-investment, and $75 million of that investment again will be used to buy a 26 percent equity interest in Qualcomm's BWA entity.

Apparently, this entity is held by Global Holding Corporation Private Limited - parent company of GTL Infrastructure Limited and Tulip Telecom Limited.

Hence forth, Bharti will have to use the remaining $90 million to acquire fresh equity in these entities and then it will get the right to use Qualcomm's spectrum assets in Delhi, Mumbai, Haryana and Kerala.

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