Rating agency speculates that Airtel Lanka may seek M&A due to ‘intense competition’

25 Jan 2021

For the second time in ten months, Fitch Ratings has suggested that mobile network operator (MNO) Airtel Lanka may look to secure a merger with or acquisition by a larger rival, as it struggles to make headway in an intensely competitive local market that requires it to inject significant CAPEX investment to stay in the race. The rating agency noted: ‘We expect further sector consolidation and believe Airtel Lanka, a subsidiary of Bharti Airtel Limited (BBB-/Negative), may seek M&A due to mobile competition and higher taxes amid high CAPEX requirements,’ and reiterated its opinion that in the coming quarter local telcos will focus on profitability rather than price-based competition.

In a previous report, Fitch had speculated that if Sri Lanka’s largest MNO by subscribers, Dialog Axiata wanted to expand via an acquisition, it has ‘sufficient headroom for the company to undertake a debt-funded acquisition of a small operator’. That being said, Fitch attached a caveat that ‘any rating action would depend on the acquisition price, funding structure and the financial and the operating profile of the combined entity’.

Sri Lanka, Bharti Airtel Lanka, Dialog Axiata