Rating Action:
Moody's changes outlook on Telecom Italia to negative; affirms Ba1 ratings
10 Jul 2019
Madrid, July 10, 2019 -- Moody's Investors Service ("Moody's") has today changed to negative from stable the outlook of Telecom Italia S.p.A. ("Telecom Italia" or "the company"), the leading Italian integrated telecommunications provider. Concurrently, Moody's has affirmed the company's Ba1 corporate family rating (CFR), Ba1-PD probability of default rating (PDR), and the ratings of all debts issued (or guaranteed) by the company, and all supported debts within its family of issuers, including the Ba1 senior unsecured ratings and (P)Ba1 MTN program ratings.
"The change in outlook to negative reflects our expectation that Telecom Italia will continue to operate in a very competitive environment and with sustained high leverage, in spite of management's strong commitment to reduce debt. As a result, we expect the company's leverage to remain outside the tolerance levels for its rating category for the next 24 months" says Carlos Winzer, Moody's Senior Vice President and lead analyst for Telecom Italia. Moody's estimates that the company's Moodys-adjusted Net Debt/EBITDA will remain close to 4.0x in 2019 and above 3.5x in 2020.
"This high leverage is partially mitigated by the commitment from the recently appointed CEO to prioritize deleveraging and our expectation of gradual improvements in the company's operating performance as revenue trends could start improving in 2020. In particular the current discussions taking place to potentially merge Telecom Italia's fixed network with Open Fiber, the announced network sharing agreement with Vodafone Group Plc (Baa2, Negative) and other possible measures to improve Telecom Italia´s credit strength, are certainly positive and reflect management's determination and execution capabilities" adds Mr. Winzer.
A full list of affected ratings is provided towards the end of this press release.