According to the new report by Moody's Investors Service, intense competition will persist over the next 12 months as we expect RJio will remain aggressive in acquiring new subscribers and growing the data market.
It said that Bharti Airtel implements plans and tariffs to protect and grow their market shares. Adding that the company has the ability to expand profitability for its core Indian mobile operations relies on the company retaining its higher ARPU subscribers while increasing the pace of subscriber acquisitions organically and through acquisitions.
The report says that this competition will occur even though ongoing and transformative consolidation in the sector and Reliance Jio Infocomm Limited's (RJio, unrated) tariff plan will help stabilize the industry's average revenue per user (ARPU) over the longer term.
At the same time, Moody's has changed the outlook of Bharti Airtel on the ratings to negative from stable.
In addition, the company's total reported debt at 31 March 2017 was Rs 1,074 billion, a rise of around 6.9 percent year-on-year, and largely a result of higher spectrum liabilities (Rs 439 billion versus Rs 341 billion at year-end 2016).
"Leverage remained elevated at year-end, resulting in adjusted debt/EBITDA of 3.3x. We expect Bharti's profitability to remain under pressure as competition remains at heightened levels over the near-term; as such, we believe that a permanent reduction in leverage to levels more appropriate for the Baa3 rating -- such that adjusted debt/EBITDA trends to 3.0x by June 2017 -- is unlikely," adds Di Chiara, also Moody's Lead Analyst for Bharti.
For year-end 31 March 2017, the company's Indian mobile services segment contributed around 59 percent of consolidated revenues and 64 percent of reported consolidated EBITDA and remained the key driver of profitability.
Bharti has been able to demonstrate increasing its revenue market share for its India mobile services from to 33.1 percent at Dec 2017 from 31.6 percent as at Dec 2016, according to the Telecom Regulatory Authority of India.