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'Telcos revenue rising but accumulated debt eating into it'


New Delhi: Telecom companies' earnings are stabilizing but leverage will remain elevated as significant fees owed to the government will likely be debt funded, Moody's said on Thursday.

Funding of Department of Telecommunications dues will push debt higher and profitability will remain muted, it said.

Moody's said ARPUs are on the rise for both Bharti and Vodafone.

Average revenue per user (ARPU) is rising, which will be helped further with expected tariff hikes beginning in December 2019. Cash flow will remain under pressure as cash obligations are likely to rise (higher interest costs, DoT payments, ongoing capex), although moratorium on spectrum payments over the next two years will provide some relief Companies of interest, it noted in its report.

Bharti Airtel which carries Ba1 negative rating, will have its balance sheet leveraged to remain elevated and cash flow under pressure given cash outlays associated with DoT fees.

Uncertainty as to whether profitability, cash flow and debt levels can improve sustainably and materially remain key credit risks.

VodaIdea and Airtel posted Rs 74,000 crore loss in Q2 on AGR provisioning due to pending government dues. Vodafone Idea and Bharti Airtel had even raised doubts over their ability to continue as going concerns while posting unp recedented losses of Rs 50,921.9 crore and Rs 23,045 crore, respectively, for the July-September quarter, after provisioning highly for adjusted gross revenue (AGR)-based dues following a recent Supreme Court ruling.

Vodafone Idea whose quarterly loss was the worst in India' s corporate history has set aside Rs 25,680 crore, while Bharti Airtel which posted the third-worst quarterly loss ever for India Inc -- provided for Rs 28,450 crore, the two companies said in separate statements Thursday , Moody's said.

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