Telecom Italia SpA

The negative outlook reflects risks stemming from the combination of materially negative reported FOCF after leases in our 2022-2023 forecasts, still-challenging conditions in the domestic telecom market, large debt maturities, and a worsening macroeconomic environment. Operational, investment, and refinancing risks could further widen the company's FOCF deficit, potentially compromising its ability to deleverage. We could lower the rating if we forecast more negative reported FOCF after leases, a diminishing chance of sustainable EBITDA stabilization, or any emerging liquidity concerns. This could stem from a return to unsustainable mobile competition that depresses ARPU or causes a spike in customer attrition, or from longer-term fixed-line deterioration under wholesale pressure from Open Fiber and retail pressure from Iliad. We could also lower the

...Visibility on Telecom Italia (TIM)'s plan to turn around and deleverage from 2023 is constrained by the weak macroeconomic environment. During the year, the macroeconomic environment and forecasts have worsened, and we now expect Italy's GDP will decline by 0.1% in 2023. We therefore believe slower GDP growth, booming inflation and energy costs, and increasing unemployment could hit TIM's retail and business-to-business operations as demand from customers with lower-than-average discretionary incomes contracts or enterprises scale back or delay their project spending. Moreover, we believe rising interest rates and jittery debt markets are currently an additional hurdle, considering the company's 8.3 billion of debt maturing over the next 24 months. TIM has adequate liquidity over the next 12 months but large debt maturities amid rising interest rates, constrained debt markets, massive capex during the group's attempt to restructure. We believe TIM has sufficient available cash and undrawn...

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