Telecom operator Bharti Airtel Limited (BAL) recently proposed a corporate structure. Through the reorganisation, BAL aims to sharpen its focus on the digital business and unlock value. India Ratings and Research (Ind-Ra) stated the recently proposed corporate structure by Bharti Airtel is credit neutral. The reorganisation proposal is subject to regulatory approvals.
The rating agency explained the agency has taken a consolidated view of Bharti Airtel and its subsidiaries, including Bharti Hexacom Limited, Bharti Telemedia Limited and Airtel Africa plc, to arrive at the ratings. This is mainly due to the strong operational and strategic linkages among them.
The agency stated that the linkages will remain strong even under the new corporate structure.
While the operator has a strong track record of building businesses and monetising the same, the rating agency is considering accessing the evolution of digital business and any monetisation of the same on a case-by-case basis. “Moreover, Ind-Ra believes that segregation of licensed and un-licensed revenue streams would provide better clarity on regulatory liabilities, thereby reducing regulatory risks.”
The agency stated, “Ind-Ra rates BAL’s debt at ‘IND A1+’, Bharti Hexacom’s debt at ‘IND A1+’, and Bharti Telemedia’s debt at ‘IND A1+’.”
The outlook for the Indian telecom sector for FY22 is stable, according to the agency. The agency believes that post the first round of consolidation witnessed by the sector over the last decade, the second round of consolidation (Consolidation 2.0) is kicking in the industry.
“This will bring a structural shift in the business model of telcos from being a provider of voice-only services to a complete digital solution provider.” The offerings such as broadband services, cable TV services (direct -to-home), enterprise solutions (B2B), e-payment wallets/ platforms, music applications and over the top transmission platform, will now become the core offerings. This will help operators in the medium term unlike before, to ensure customer acquisition, customer stickiness and to strengthen the market footprint.