Moody's cuts Telecom Italia, citing operating environment, financial policy choices
- The downgrade reflects our expectation that Telecom Italia will remain adversely affected by a very competitive operating environment in Italy.
- we expect further investments in Brazil together with the restored dividend policy and the increasing complexity of the group structure to translate into higher business and financial risks.
Moody's Investors Service downgraded Italy's biggest phone group Telecom Italia's ratings on Thursday to Ba2, with a negative outlook, citing a challenging operating environment and "aggressive" financial policy decisions.
"The downgrade reflects our expectation that Telecom Italia will remain adversely affected by a very competitive operating environment in Italy which will further constrain the company's ability to strengthen cash flow generation and reduce leverage," Carlos Winzer, a Moody's Senior Vice President and lead analyst for Telecom Italia said on Thursday.
"In addition, we expect further investments in Brazil together with the restored dividend policy and the increasing complexity of the group structure to translate into higher business and financial risks," the analyst said.
However, the rating agency added that it considers Telecom Italia's liquidity position to be strong.
Revenue at Europe's sixth-largest telecom group fell to 3.9 billion euros ($4.73 billion) in the three months through September, down from 4.4 billion a year before, the company said last month. Its organic earnings before interest, tax, depreciation and amortization (EBITDA) after lease costs fell 8% to 1.6 billion euros.
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