Global credit rating agency Moody’s has given ‘Baa3’ rating to Bharti Airtel, saying that this is underpinned by receipt of strong and growing cash flows from its Indian operations.

The Baa3 rating means the entity is medium-grade and subject to moderate credit risk and has an acceptable ability to repay short-term obligations.

“Bharti’s Baa3 rating is underpinned by its receipt of strong and growing cash flows from its Indian operations, particularly in wireless, where it enjoys a well—established and leading market position under the Airtel brand,” Moody’s Senior Vice President Laura Acres said in a statement.

Moody’s said the regulatory environment for telecommunications in India has been fraught with uncertainty over the past several years but the situation is easing now following the September 2013 recommendations made by the regulator (TRAI) on spectrum charging.

“This easing should result in a lower regulatory charge for Bharti and together with an industry—wide reduction in competitive pressures should help to contribute to ongoing improvements in cash flow generation,” the statement said.

It said the rating also takes into account the company’s large US dollar denominated borrowings and the currency mismatch with its revenue base.

Bharti Airtel’s net debt in dollar terms was $11,738 million as on March 31, 2013.

Moody’s said that this situation may give rise to translation risk but the company has a board stated policy of hedging a substantial level of its total foreign liabilities due over the next 12—month period.

“At the same time, concerns exist regarding its exposure to the risk of changes to the regulatory and political environments in some of the countries in which it operates, especially after its 2010 investment into 15 (now 17) African countries,” Acres said.

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