SINGAPORE: S&P Global Ratings placed the ratings of Bharti Airtel on CreditWatch with negative implications to reflect a potential deterioration in Bharti Airtel's credit metrics following an adverse court ruling. India's Supreme Court ruled against the company in its dispute with DoT. “In our view, Bharti Airtel has negligible financial headroom in the 'BBB-' ratings, and may not be able to absorb the sizable payout that could result from the verdict,” S&P press release noted. “Prior to the verdict, we expected Bharti Airtel's ratio of funds from operations (FFO) to debt to recover to above 20% by the end of fiscal 2020 (year ending March 31, 2020). This was based on our expectation of easing competition in India's wireless market over the next 12-18 months, as all the incumbents seemed to be inching toward a more sustainable tariff regime. The company's India mobile revenue growth accelerated to 7.4% in the second quarter of fiscal 2020, from 3.7% in the previous quarter. This performance is largely in line with our estimates for fiscal 2020”. S&P sees the adverse verdict as a setback to the prospects of Bharti Airtel's FFO-to-debt ratio recovering beyond 20%, a threshold necessary for the 'BBB-' rating. We see a meaningful chance that the payment could be significant, and the expected recovery in the company's leverage may not happen unless it takes measures to offset the effect. The DoT had filed a demand of Indian rupee (INR) 216.8 billion from Bharti Airtel for disputes related to license fees payable. Additional amounts could be payable in respect of disputes related to spectrum usage charges as well. “We are likely to consider the adjudicated demand as debt-like in our future leverage calculations for Bharti Airtel”. On Oct. 24, 2019, the Supreme Court of India ruled in favor of DoT, resolving the long-standing disputes between Indian telecommunications companies such as Bharti Airtel and DoT. The verdict largely accepted DoT's view of the calculation of adjusted gross revenues, which eventually forms the basis of spectrum usage charges and license fees payable by the Indian telecommunication companies. Bharti Airtel is considering several options including representations to the DoT to alleviate the stress caused by the verdict and other pertinent matters related to the telecommunications industry. The company has deferred the release of its half-yearly results to Nov. 14, 2019. Subsequent to the ruling, the government of India appointed a panel to consider measures to lighten the mounting stress on the domestic telecom industry. Recently, it announced a INR700 billion bail-out package for the government-owned telecommunications enterprises Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. However, uncertainty surrounds the timing and extent of support, if any, that the government may provide to the industry. “We aim to resolve the CreditWatch within the next 90 days, after we have greater clarity and more information on the financial implications of the verdict and Bharti Airtel's response to it. Our resolution will include a revised base case”. S&P would lower the rating by one notch if the obligation is in line with the DoT's claims and the recovery in the company's leverage is pushed beyond fiscal 2021. “We could affirm the ratings if the company contains the amount of payout such that its FFO-to-debt ratio could still recover above 20% before the end of fiscal 2021”.