Fitch downgrades Telecom Italia to ‘BB-‘

Nov 15 (Reuters) – Credit rating agency Fitch on Tuesday downgraded Telecom Italia’s credit rating from “BB-” to “BB-“, citing insufficient debt reduction in 2022.

Fitch said its outlook for Italy’s biggest telephony group was “negative”, warning that rising inflation and falling consumer purchasing power will affect earnings before interest, tax, depreciation and amortization (EBITDA). ) and income.

“We expect Fitch-defined EBITDA to decline to €5 billion in 2022 from €5.3 billion in 2021,” the ratings agency said.

Fitch’s baseline forecast assumes that Telecom Italia’s net EBITDA leverage will increase to around 4.7x at the end of 2023 from 4.3x at the end of 2022 before declining to around 4.6x at the end of 2024.

He expects the company’s free cash flow to remain negative for at least three years, adding that funding its negative free cash flow is increasingly important given the volatility in financial markets and high interest rates.

Rating agency S&P Global downgraded Telecom Italia from “BB-” to “B+” in October, citing a weak macroeconomic environment. In July, Moody’s downgraded Telecom Italia one notch to “B1”, citing expectations that its leverage will remain high and its free cash flow will remain negative for the next two to three years.

Italy’s new government wants to bring Telecom Italia’s network under state control to speed up the digitalization of the economy, Industry Minister Adolfo Urso said on Monday.

Reporting by Rhea Binoy in Bengaluru; Editing by Lisa Shumaker and Richard Chang

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