Telecom Italia credit rating may be headed downward after exec quits
Telecom Italia CEO Franco Bernabe's resignation has created the distinct possibility that Standard & Poor's will likely cut the carrier's debt rating to junk, according to a Bloomberg report.
At the very least, the carrier's long term rating will be downgraded by a triumvirate of firms that also include Moody's Investors Service and Fitch Ratings, the story continued.
Bernabe quit last week as the company wrestled with ways to boost its finances with shareholders which include Telefonica SA, a Spanish firm that bought a stake in the Italian telecom six years ago and favored a sell-off of Telecom Italia's Brazil-based Tim Participacoes unit for about $12 billion. Bernabe, who was replaced by COO Marco Patuano, opposed the sale in favor of a capital increase and a spinoff of Telecom Italia's fixed line network.
S&P looked at the turmoil and determined that the carrier "is suffering increasing management and government weakness," it said in a statement. "The group has limited possibilities of accelerating debt reduction or stabilizing its operating performance over the near term."
That statement means that "S&P has just substantially weakened TI's credit profile," noted Roger Appleyard, head of global credit research at RBC Capital Markets in London, the story said.
In the midst of all the turmoil, a source with direct knowledge of the company, said that Vodafone wouldn't be interested in bidding on Tim. Meanwhile, Egyptian billionaire Naguib Sawiris, who bid on a stake in TI last year, increased his short position to about 1.2 percent of the capital in the carrier. In unrelated news, the Canadian government recently rejected a move by Sawiris' firm Accelero Capital Holdings to acquire Manitoba Telecom Services (MTS) Allstream division.
A spokesman for Telecom Italia declined to comment on S&P's statement for the Bloomberg article.
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