Fitch predicts Airtel Lanka merger as competition hots up

Fitch predicts Airtel Lanka merger as competition hots up

Fitch Ratings has reiterated its prediction that Airtel Lanka will seek a merger with – or to be acquired by – a rival, given the overwhelming amount of CAPEX investment required to remain competitive in an aggressive market.

In a statement, the agency said: “We expect further sector consolidation and believe Airtel Lanka, a subsidiary of Bharti Airtel Limited (BBB-/Negative), may seek M&A due to mobile competition and higher taxes amid high CAPEX requirements.”

The agency further underlined its expectation that local operators will seek to maximise profitability in the next quarter, rather than competing in terms of tariffs.

As reported by CommsUpdate, this is the second time within ten months that Fitch has predicted Airtel Lanka pursuing merger activity, with its previous report noting that Sri Lanka’s market leader Dialog Axiata had “sufficient headroom for the company to undertake a debt-funded acquisition of a small operator” if it was interested in an acquisition.

The agency noted that “any rating action would depend on the acquisition price, funding structure and the financial and the operating profile of the combined entity.”