Standard and Poor's Ratings Services on Friday slashed Indian telecom giant Bharti Airtel's long-term corporate credit rating to 'BBB-' with negative implications. The fall in ratings came after the company proposed to takeover Zain Africa.

Justifying its move, S&P said that Zain's acquisition based on debts and then the 3-G license auction may deteriorate Bharti's financial conditions, especially debt to EBITDA ratio. S&P expects the ratio to almost double to 3.0 times at the end of financial year 2010-11 as compared to just 1.4 times for the calendar year ended on December 31, 2009 indicating increased debt burden on the company and its falling debt repayment capacity.

However, S&P also clarified that the acquisition would give a competitive advantage and unlock greater growth opportunities for Bharti in Africa as mobile penetration is on a lower side in the continent. Zain Africa currently has 42 million subscribers in Africa.

The merger would also provide the company an opportunity to exploit economies of scale as the combined entity would stand tall as the leading telecom service provider in a long list of African countries and India.