In an Unprecedented move, Moody’s investor services, for the first time downgraded Bharti Airtel to “junk” status. The new rating is going to cause troubles to Bharti Airtel which is already losing its ground in the Indian telecom business, since the arrival of Mukesh Ambani’s led Reliance Jio in 2016.
The fall in rating from Baa3 to Ba1 casts deep suspicion over Airtel’s future prospect. Profitability, cash flow, debt level and other such factors still remains uncertain as per by Moody’s investor services.
Negative free cash flow seems to be the major reason which induced the Moody’s to downgrade Bharti Airtel to “junk” status. The company is struggling with the negative cash flow from the last three quarter and has hit lowest in the last 15 years of its history in context of free cash flow.
Reliance Jio’s arrival has caused a great disruption in the Indian telecom market. Bharti Airtel which was once the market leader before Reliance Jio, can now slip to third position if this trade war goes on. The company seems to have lost in the narrowing race for India’s telecom market leader. The disruption which Jio has caused, with its free subscription and low tariff policies had caused such a great encroachment in the Airtlel’s consumer base that escaping it seems very difficult for it as of now. And now “junk” status by Moody’s would only deteriorate the situation for already grappling Bharti Airtel and can lead to less flow of investment and free cash.