Tata’s mobile business acquisition to improve Airtel’s credit profile: Fitch

Credit rating agency Fitch Friday said that Sunil Mittal-driven Bharti Airtel’s acquisition of the mobile business of Tata Teleservices and Tata Teleservices (Maharashtra) would improve former’s profile and termed the development as positive for the two companies.

“Bharti’s credit profile will improve slightly as it is paying no consideration for the operations, which it would acquire free of debt,” the US-based firm in a statement said.

Fitch believes the benefits from additional spectrum, fibre assets and subscribers would be more than the offset of additional spectrum liabilities.

“The deal would help arrest the decline in Bharti’s EBITDA and bolster its 4G spectrum portfolio and network positioning,” it said, adding that the move would also help the sector.

Tata’s exit from the consumer mobile segment, according to Fitch would avoid future investment requirements and potential further losses for the Mumbai-headquartered company.

Bharti and Tata group Thursday entered into a debt and cash free deal that, according to experts would further intensify the industry-wide consolidation, with market-leader positioning strategically against Vodafone-Idea combine.

Tata, as a part of deal, would not transfer the $6.2 billion in on-balance sheet debt and will retain its enterprise business, retail fixed-line and broadband businesses.

Gurgaon-based Bharti Airtel would gain about 178.5 MHz of spectrum in the 850MHz, 1800MHz and 2100MHz bands in 17 Indian telecom coverage areas, the right to use Tata’s extensive fibre network and 42 million subscribers that will add to its existing Indian subscriber base of 281 million.

We estimate Bharti will take over only a small part of Tata Telecom’s deferred spectrum liabilities of $1.5 billion. We do not expect the transaction to result in any other increase in debt at Bharti, it said in a statement.

The development between the two companies would hasten consolidation in the industry with three to four operators play, according to analysts.