This is the second time in recent months that it is tapping euro bonds; company raised close to $1 bn from European investors last Dec
Bharti Airtel, India's biggest mobile services provider, is raising up to $1.5 billion this week in euro and dollar bonds to refinance old loans.
Bankers said the bonds to be issued by Bharti Airtel International (Netherlands), a subsidiary of Bharti Airtel, had received bids almost double the proposed issue size. This is the second time in recent months that Bharti Airtel is tapping euro bonds. The company raised close to $1 billion from European investors last December.
Bharti Airtel confirmed to the BSE that it was raising funds through 10-year dollar bonds and seven-year euro bonds but did not offer further details.
It is vital for Bharti Airtel to refinance its $11 billion debt. The bulk of these loans were taken to buy the Kuwait's Zain Group's telecom holdings in Africa in 2010 for $10 billion. This acquisition is yet to make money for Bharti Airtel.
In a statement on Bharti Airtel's proposed bonds, credit rating agency Fitch said the company's 'BBB-' rating would not withstand big debt-funded acquisitions or higher-than-expected regulatory costs. Bharti Airtel's funds flow from operations adjusted for net leverage is around 2.3-2.5 times for 2014-15, very close to the threshold Fitch considers for a ratings downgrade.
Fitch expects Bharti Airtel to generate at least Rs 3,500-4,000 crore in free cash flow despite having a ratio of capital expenditure to revenue of 18-19 per cent as competition eases in India and margins stabilise in its African operations.
"We expect the 2014-15 earnings before interest, tax, depreciation and amortisation (Ebitda) margin to be stable at 31-32 per cent (32.3 per cent in 2013-14) as the top four Indian telecom companies increase voice realisation by reducing discounts. The February spectrum auctions should hasten industry consolidation, strengthen tariffs and reduce regulatory risks," Fitch said.
"In the medium term, we expect the bottom six telecom companies to exit the industry as they lack sufficient spectrum and financial resources to remain viable. During 2013-14, Bharti Airtel's leverage improved mainly due to the higher Ebitda margin at its Indian operations, which increased to 35.7 per cent from 32.5 per cent," the ratings firm said.
It added that Bharti Airtel continued to struggle to improve its African Ebitda margin (26 per cent in 2013-14) as a low usage elasticity, high costs and largely on-net voice traffic favoured larger incumbent operators. Bharti Airtel, however, has gained ground and is now the second-largest operator by subscribers in Nigeria, which accounts for about a third of its African revenue and Ebitda.
"The profitability will rise only gradually as usage grows and the tariff differential between off-net and on-net calls narrows following a cut in mobile termination rates in some African markets," it said.
TACKLING DEBT
* It is vital for Bharti Airtel to refinance its $11-billion debt
* Fitch expects Bharti Airtel to generate at least Rs 3,500-4,000 crore in free cash flow despite having a ratio of capital expenditure to revenue of 18-19% as competition eases in India and margins stabilise in its African operations
* The February spectrum auctions should hasten industry consolidation, strengthen tariffs and reduce regulatory risks, says Fitch
Source: Business Standard
Bharti Airtel, India's biggest mobile services provider, is raising up to $1.5 billion this week in euro and dollar bonds to refinance old loans.
Bankers said the bonds to be issued by Bharti Airtel International (Netherlands), a subsidiary of Bharti Airtel, had received bids almost double the proposed issue size. This is the second time in recent months that Bharti Airtel is tapping euro bonds. The company raised close to $1 billion from European investors last December.
Bharti Airtel confirmed to the BSE that it was raising funds through 10-year dollar bonds and seven-year euro bonds but did not offer further details.
It is vital for Bharti Airtel to refinance its $11 billion debt. The bulk of these loans were taken to buy the Kuwait's Zain Group's telecom holdings in Africa in 2010 for $10 billion. This acquisition is yet to make money for Bharti Airtel.
In a statement on Bharti Airtel's proposed bonds, credit rating agency Fitch said the company's 'BBB-' rating would not withstand big debt-funded acquisitions or higher-than-expected regulatory costs. Bharti Airtel's funds flow from operations adjusted for net leverage is around 2.3-2.5 times for 2014-15, very close to the threshold Fitch considers for a ratings downgrade.
Fitch expects Bharti Airtel to generate at least Rs 3,500-4,000 crore in free cash flow despite having a ratio of capital expenditure to revenue of 18-19 per cent as competition eases in India and margins stabilise in its African operations.
"We expect the 2014-15 earnings before interest, tax, depreciation and amortisation (Ebitda) margin to be stable at 31-32 per cent (32.3 per cent in 2013-14) as the top four Indian telecom companies increase voice realisation by reducing discounts. The February spectrum auctions should hasten industry consolidation, strengthen tariffs and reduce regulatory risks," Fitch said.
"In the medium term, we expect the bottom six telecom companies to exit the industry as they lack sufficient spectrum and financial resources to remain viable. During 2013-14, Bharti Airtel's leverage improved mainly due to the higher Ebitda margin at its Indian operations, which increased to 35.7 per cent from 32.5 per cent," the ratings firm said.
It added that Bharti Airtel continued to struggle to improve its African Ebitda margin (26 per cent in 2013-14) as a low usage elasticity, high costs and largely on-net voice traffic favoured larger incumbent operators. Bharti Airtel, however, has gained ground and is now the second-largest operator by subscribers in Nigeria, which accounts for about a third of its African revenue and Ebitda.
"The profitability will rise only gradually as usage grows and the tariff differential between off-net and on-net calls narrows following a cut in mobile termination rates in some African markets," it said.
TACKLING DEBT
* It is vital for Bharti Airtel to refinance its $11-billion debt
* Fitch expects Bharti Airtel to generate at least Rs 3,500-4,000 crore in free cash flow despite having a ratio of capital expenditure to revenue of 18-19% as competition eases in India and margins stabilise in its African operations
* The February spectrum auctions should hasten industry consolidation, strengthen tariffs and reduce regulatory risks, says Fitch
Source: Business Standard
