Higher Debt After 5G Auction Won’t Impact Telecom Italia’s Rating

An expected increase in Telecom Italia’s debt pile after an ongoing auction for fifth-generation mobile spectrum will not impact Moody’s rating on the Italian phone group, an analyst with the ratings agency said on Friday.

Italy is one of the first countries in Europe to offer frequencies for 5G services, allowing operators to roll out ultra-fast internet connections to Italian homes and businesses.

As of Thursday, the auction had attracted bids for more than 5.8 billion euros ($6.72 billion), including a potential spend for Telecom Italia (TIM) of more than 2 billion euros.

“It’s been a very aggressive auction, Telecom Italia will end up increasing its debt and therefore the leverage ratio is going to go up, but we don’t expect the ratio to exceed the trigger for downward pressure on the rating,” Carlos Winzer, Moody’s lead analyst for the European telecom industry, told Reuters.

Only if Moody’s adjusted ratio (debt to EBITDA) for TIM exceeded 3.5 times, versus 3.4 times at the end of 2017, would downward pressure be exerted on the rating, Winzer said.

He did not specify what exact leverage ratio he expected for TIM after the auction other than saying that the ratio would be above 3 times “for a prolonged period”. – Reuters