Telecom Italia's rating on review

Ratings agency Moody’s Investors Services is considering downgrading Telecom Italia’s debt and loan guarantees, after domestic revenues slumped in the first half.
Moody’s is reviewing the telco’s Baa3/(P)Baa3 senior unsecured, and Ba2 subordinated ratings on the back of a €944 million year on year fall in first half revenue, and a 13.2% decline in EBITDA in Italy. The agency is also concerned Telecom Italia will struggle to reverse the fall amid intense competition in its home market.
“The company’s inability to meet its domestic and group EBITDA targets has also raised concerns,” says Carlos Winzer, a Moody's Senior Vice President and lead analyst for Telecom Italia.
Telecom Italia’s Brazilian business recorded a 68% drop in EBITDA year on year, and its Argentinean unit a 13% decline.
Franco Bernabè, chairman of the telco, says the firm deliberately took a hit on earnings by “investing part of the margin to pave the way for the defense and net acquisition of customers,” to combat continued weakness in Italy’s economy, and slower growth in the Latin American economy in the first half.
While Bernabè predicts better times ahead in terms of economic and regulatory stability, the firm is now predicting higher EBITDA declines for the back half than it previously estimated.