Bharti's sale of over 4,800 towers in Nigeria is credit positive, Moody's says

COIMBATORE: Moody's Investors Service has said that Bharti Airtel's (Baa3, stable) decision to sell approximately 4,800 of its telecommunications towers in Nigeria is credit positive.
"This transaction is credit positive as it will allow Bharti to pay down balance sheet debt, reduce its interest cost, and reduce total capital expenditure on passive infrastructure investments," said Annalisa DiChiara, a Moody's vice-president and senior analyst.
"Moreover, it is in line with the company's strategy to divest strategic but non-core assets, thus allowing it to focus on its strategic business as a cellular telecommunications operator, as well as pare down debt," DiChiara, also Moody's Lead Analyst for Bharti, said.
Bharti announced on November 24 that it had entered into a definitive agreement with American Tower Corporation (ATC, Baa3 negative) — through its subsidiary, Bharti Airtel International Netherlands BV —to sell around approximately 4,800 of its towers in Nigeria. ATC in its SEC filings stated the transaction consideration is $1.05 billion.
This transaction follows two other deals on its towers in Africa -- first in July, when it agreed to sell 3,100 towers to Helios Towers (unrated) and second in September, when it agreed to sell another 3,500 to Eaton Towers (unrated).
With the Nigerian deal, the company has now agreed to sell over 75% of its portfolio of around 15,000 towers in Africa, Moody’s stated.
The sales to Eaton and Helios are for undisclosed sums, while the total of $1.05 billion for the sale to ATC translates to over $2,00,000 per tower. All three transactions are still subject to statutory and regulatory approvals in their respective countries.
Moody's expects that the majority of proceeds -- once they are received – will be deployed towards the repayment of balance sheet debt.
The company's proactive steps to reduce absolute debt will also help reduce interest costs and, if applied to dollar-denominated debt, decrease its foreign currency risk exposure further.
At end-March 2014, around 60% of its total outstanding debt was denominated in dollar, while its cash flows are largely rupee-denominated.
The company has used proceeds from the Bharti Infratel offer for sale that raised Rs 2139.5 crore ($348.8 million) to pay down a portion of its dollar-denominated debt.
“As a result, we believe Bharti's level of exposure to the dollar (debt) has already improved considerably, and the proportion dollar-denominated debt will trend towards 40% by end March 2015, a development which we view positively,” Moody’s said.