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Telecom Italia Upgraded By S&P

COMMUNICATIONS

New Profile: Ba3[P]/BB/BB- (Fitch on Rating Watch Positive)


  • TITIM upgraded from B+ to BB[S] post-Netco disposal with the CreditWatch removed, reflecting improved credit profile and commitment to moderate leverage.
  • Debt reduced by EUR 14bn, lowering adjusted debt to EBITDA from ~5x to 3.8x in 2024 and 3.5x in 2026.
  • Lower earnings and diversification increase business risk, as does competition in Italy though the group’s size and strong market positions in Italy/Brazil support the risk profile.
  • FOCF seen negative in 2024 2026 due to cost efficiency program outflows with marginal improvement in 2025-2026; FOCF to debt not expected to exceed 5% until 2026.
  • S&P see potential further for deleveraging from asset sales and litigation though this remains uncertain; Sparkle disposal and a potential licensing fee litigation windfall not included in base case.
  • Upside/downside thresholds given at leverage of 3.5x/4.5x; upside also tied to FOCF to debt comfortable above 5%.

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