Standard & Poor’s Ratings Services said today that India-based telecommunication operator Bharti Airtel Ltd.’s (BBB-/Stable/–) recent announcement on holding an exploratory discussion with South Africa-based MTN Group Ltd., by itself, would not have an impact on the ratings on Bharti, as the discussions are still preliminary.

If the company makes noticeable progress in these discussions and the possibility of a significant investment or acquisition increases, we are likely to place the ratings on CreditWatch with negative implications. This will signal rating pressure stemming from the financing and the incremental debt required to fund the outlay for the potential transaction. Standard & Poor’s currently views that there may not be any upside potential in the ratings, if Bharti indeed pursues a significant investment or acquisition in MTN.

While a prominent overseas investment adds diversity to Bharti’s businesses and cash flows, the financing and the debt requirements are of greater concern, especially since Bharti has budgeted capital expenditures of about US$3.3 billion per annum.

In the third quarter of fiscal 2008, Bharti’s cash flow protection is strong and leverage is low with a debt to EBITDA of 1.1x as on Dec. 31, 2007. We will remain guided by the overall business position of the company and the credit-metrics thresholds (including consolidated debt to EBITDA not to increase above 2.0x on a sustainable basis) to establish the impact on ratings.

Sourced From: CRISIL Limited

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