Research Update: Telecom Italia SpA Downgraded To 'BB-' On Weaker Credit Ratios And Financial Prospects; Outlook Negative

In contrast to our previous forecast for adjusted debt to EBITDA of less than 4.5x for Telecom Italia SpA in 2021-2022, we now expect lower revenue and earnings and negative free operating cash flow (FOCF) after leases will cause our adjusted leverage metrics to remain above our 4.5x threshold for the 'BB' rating. The weaker performance and guidance are due to year-on-year domestic revenue and EBITDA declining faster than anticipated, a slower recovery of roaming and handset sales, and adverse currency movements that are still affecting contributions from the Brazil business in 2021. We now anticipate a low-single-digit-percent decline in total revenues in 2022--versus a stabilization in our previous forecasts--and a drop in adjusted EBITDA margin toward 37%-38%, versus about

...- In contrast to our previous forecast for adjusted debt to EBITDA of less than 4.5x for Telecom Italia SpA in 2021-2022, we now expect lower revenue and earnings and negative free operating cash flow (FOCF) after leases will cause our adjusted leverage metrics to remain above our 4.5x threshold for the '##' rating. - The weaker performance and guidance are due to year-on-year domestic revenue and EBITDA declining faster than anticipated, a slower recovery of roaming and handset sales, and adverse currency movements that are still affecting contributions from the Brazil business in 2021. - We now anticipate a low-single-digit-percent decline in total revenues in 2022--versus a stabilization in our previous forecasts--and a drop in adjusted EBITDA margin toward 37%-38%, versus about 40% in 2021. It results in S&P Global Ratings-adjusted leverage of about 5.3x in 2022, improving toward 5.0x in 2023. - Therefore, we lowered our long-term rating on Telecom Italia to '##-' from '##'. - The negative...

Research Update