Bharti Airtel's Purchase of Loop Mobile is Credit Positive Says Moodys
Published on: 20th Feb 2014
By: Ian Mansfield
The debt ratings agency Moody's says that Bharti Airtel's recently announced acquisition of Loop Mobile is credit positive for the company.
"The proposed acquisition of Loop is credit positive, not only will it add 3 million subscribers to Bharti's existing subscriber base of 4 million in Mumbai, catapulting it to the #1 position by customers in this key market ahead of Vodafone India, it is also immediately EBITDA accretive for Bharti" says Laura Acres, a Moody's Senior Vice President.
Loop also has a higher proportion of more remunerative post-paid subscribers and tower rights in key areas, which should improve the network coverage and the overall blended ARPU for Bharti.
"This is a relatively small acquisition, and we expect it to have minimal cash impact on Bharti as a significant portion of the cost represents assumption of Loop's outstanding loans. Bharti will be able to fund the acquisition cost with existing funds without the need for new borrowings, as such, it can be comfortably accommodated within the rating." adds Acres, also the lead analyst for Bharti.
The acquisition remains subject to government approval.
The acquisition also represents one of the first steps toward industry consolidation in a highly competitive market.
India currently has some 12 operators across 22 circles. Moody's generally views markets with 3-4 national mobile operators as being more efficient, therefore the acquisition and the industry shift it signals are both positive developments.
"The expanded subscriber base in Mumbai post the acquisition of Loop, coupled with Bharti's newly acquired 5MHz of 900MHz spectrum, will significantly boost the company's competitive position in this key market and also provide it with a strong platform to launch its 3G services," adds Acres.