S&P warns of Bharti downgrade over Zain

Nicole McCormick
telecomasia.net
Standard & Poor’s said Bharti Airtel’s long-term BBB corporate credit is at risk as a result of its $9 billion bid for Zain Africa.
 
The debt ratings agency has put the company on Credit Watch on expectations of a “significant deterioration in Bharti’s cash flow protection.”
 
It also expects a weakening of the company’s business risk profile if it acquires Zain Africa.
 
A debt-funded acquisition, combined with 3G auction costs in India could increase Bharti’s pro forma consolidated debt to ebitda ratio from 1.4x in calendar year 2009, to 3x for the year ending March 2011, said S&P.
 
Last week, Bharti offered $10.7 billion (including debt), or $9 billion net, for Zain’s assets in Africa (excluding operations in Morocco and Sudan). 
 
Bharti is conducting due diligence on the assets, with its exclusive deal negotiation period to end on March 25.
 
Bharti proposes exporting its successful Indian business model centered around infrastructure sharing to Zain’s African businesses.
 
It also plans to drive up network utilisation and usage by slashing tariffs, said the Economic Times.

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