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Airtel Tipped to Gain From AGR Relief

Moody’s upgraded its outlook for Bharti Airtel, predicting a Supreme Court ruling giving operators ten years to pay adjusted gross revenue (AGR) fees will alleviate pressure on cash flow and help improve operating flexibility.

The rating agency changed its outlook from negative to stable, citing improving profitability at Airtel’s core Indian mobile business, an increase in its 4G customer base, a gradual reduction in competition and tariff hikes which began in December 2019.

Moody’s SVP Annalisa DiChiara said the AGR payment decision is a positive development, as it means some of the proceeds the operator raised earlier this year to pay the tax can instead be applied to debt reduction.

While price competition moderated in 2020, Moody’s noted the Covid-19 (coronavirus) pandemic had resulted in some subscriber contraction, amplifying the impact of attrition related to SIM card consolidation following tariff increases at the end of 2019.

Airtel’s growing 4G subscriber base, which accounted for nearly 50 per cent of its total at end-June, is helping to stabilise profitability, DiChiara said.

Moody’s expects Airtel’s consolidated EBITDA to gradually increase from INR369 billion ($5 billion) in the fiscal year ending 31 March 2019 into the INR425 billion range.

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