Moody’s Investor Service has affirmed Bharti Airtel’s Ba1 corporate family rating (CFR) and revised the outlook to stable from negative.

The move follows the recent clarity around adjusted gross revenue (AGR) dues payment timelines and Airtel’s improved profitability of India mobile services business.

According to Moody’s, Airtel’s core India mobile business has benefited from a combination of reduced competition, steady 4G customer adds and tariff hikes taken  in December 2019. Further it added that Airtel’s operating flexibility is improving and it would benefit from a gradual expansion of profitability that provides a buffer against any material deterioration in credit measures and also supports a steady deleveraging.

Moody’s said the staggered AGR payment plan would alleviate pressure on Airtel’s cash flow, which means some of the proceeds that telco raised earlier in 2020 to fund AGR dues, can instead be applied to debt reduction. Further, the rating agency expects Airtel’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA)to gradually rise into the Rs 425 billion range and this would keep its consolidated leverage elevated at around 4x -4.25x in March 2021. However, it pointed out that around 30 per cent-35 per cent of telcos’ reported debt levels are spectrum liabilities which are not exposed to refinancing risks.

Moody’s added it could upgrade Airtel’s ratings if the its operating performance improves such that its consolidated leverage is sustained below 2.5x which needs to be achieved in conjunction with a material expansion in profitability at its core Indian mobile business.