Airtel's purchase of Aircel spectrum credit positive: Moody's

New Delhi: Bharti Airtel's acquisition of telecom spectrum in eight circles from Aircel for Rs 3,500 crore is 'credit positive' as it would extend the firm's footprint to make it a pan-India 4G operator, Moody's Investors Service said Tuesday.

The company has rolled out fourth-generation or 4G services in 427 cities across 14 circles already, as it had secured a pan-India data enablement in the 2010, 2014 and 2015 auctions, through a combination of the 900 Mhz, 1800 Mhz and 2300 Mhz bands.

"Despite the slight increase in leverage, the spectrum acquisition from Aircel is credit positive as it further extends Bharti's 4G footprint across all circles making it a pan India 4G operator," Moody's said in a note.

The 4G spectrum is critical for the next growth phase as mobile data increasingly replaces voice as the main growth driver for mobile operators. The proliferation of cheap smart phones is also leading more Indian consumers to use their handsets to access the Internet and so demand faster data connectivity.

Bharti had on Friday said it has entered into a definitive agreement with Aircel and its subsidiaries to acquire rights to use 20 MHz in the 2300 band in 8 circles. The spectrum is valid up to September 20, 2030.

Aircel will sell to Bharti 20 MHz of spectrum in the 2300 MHz band in eight circles of Tamil Nadu (including Chennai), Bihar, Jammu & Kashmir, West Bengal, Assam, North East, Andhra Pradesh and Orissa -- that can be used to service a 4G LTE network.

The announcement came less than a month after the company announced its definitive agreement with Videocon Telecommunications Ltd to acquire rights to use 2x5 MHz spectrum in the 1800 MHz band for around Rs 4,430 crore in 6 circles.

Bharti's 2300 MHz spectrum holding will increase to 170 MHz from 80 MHz, while its spectrum holding market share will rise to 38.6 per cent from 18.2 per cent.

"When considering the net effect of both of these recent spectrum acquisitions, the proforma effect of the deferred spectrum liabilities (USD 2.8 billion), proceeds associated with tower asset sales (USD 2.0 billion) and the sale of African operations to Orange - which Moody's estimates at USD 900 million -- we estimate that pro-forma leverage of around 3.1x at March 31, 2016, or the end of FY2016," it said.