India’s second-largest wireless telco Bharti Airtel's CAPEX to increase to about US$5 billion in FY 2022 from $4.6 billion in FY 2021, global rating agency Fitch said.
The multinational telecommunications services company is expected to keep $1.5 billion to make an upfront payment for acquiring 5G spectrum assets during the 5G spectrum auction in India.
“We believe that the company will also seek to strengthen its fibre infrastructure – connecting towers with fibre and backhaul infrastructure to prepare its network to launch 5G services in 2022-2023. Capex on 5G infrastructure during 2022-2023 will replace 4G investments, as 4G coverage is largely complete,” Fitch Ratings said.
Fitch also gives thumbs up to Bharti Airtel's deleveraging plan. The telecom service providers planned $2.8 billion equity issuance will improve its funds from operations (FFO) net leverage to around 2x and provide funds to strengthen its market position, according to Fitch Ratings.
Bharti will raise equity in three tranches, a quarter of the proceeds to be received upfront and the balance in two installments within three years.
The company raised about $9 billion in the financial year ended March 2020 (FY20) and FY21 via equity issuance, selling a stake in subsidiary Airtel Africa Plc and the sale-and-leaseback of towers in Africa. The management aspires to achieve a debt-to-EBITDA ratio of around 2 times in the long term.
Bharti has paid about $2.4 billion of the total of $6.4 billion owed to India's Department of Telecommunications in a dispute over the amount of adjusted gross revenue (AGR) dues. "We have factored in $4 billion for AGR dues remaining in our leverage calculation, despite the Supreme Court allowing the balance to be paid over 10 years from March 2022," it said.
"We expect wireless market leader Reliance Jio, a subsidiary of Reliance Industries Ltd, and Bharti to increase their combined revenue market share among private telcos to 80%-82% (June 2021: 77%-78%), at the expense of third-placed Vodafone Idea, which we believe may lose 50 million-70 million subscribers in the next 12 months," Fitch said.
Vodafone Idea has lost about 180 million subscribers in the last three years, with 255 million at the end-June 2021. Vodafone Idea is struggling and needs to raise new funds to pay for CAPEX, AGR dues and repay maturing debt.