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161.82p 0.8  0.5%

Last Trade - 15/10/19

Large Cap
Market Cap £43.10bn
Enterprise Value £67.19bn
Revenue £38.20bn
Position in Universe 32nd / 1856

Fitch Ratings: EMEA Telecoms' Limited Cash Flows Mean Tough Choices Ahead

Wed 29th May, 2019 10:37am
(The following statement was released by the rating agency) Fitch Ratings-London-May 29: European integrated telecom operators have low organic deleveraging capacity that may not improve in the medium term, Fitch Ratings says. This is due to a continued cash call for capex on fibre deployment and 5G spectrum payments and roll-out. The companies are likely to prioritise their cash flows for this spending. Stretched leverage metrics or limited rating headroom for many operators in the sector mean they need to implement cash-saving or capital-raising measures to maintain their credit profiles and ratings. Such measures could include cutting dividends, monetising passive infrastructure, or selling non-core assets. Despite substantial operating cash flow generation, telecoms operators' capex needs result in limited free cash flows compared with many other industries. Capital expenditure for incumbent operators typically accounts for 15%-20% of revenue (excluding spectrum costs), squeezing post-dividend FCF margins to either negative or low-single digits. These capex needs are unlikely to abate over the next two-three years due to three multi-billion-euro spending items which are essential if telecoms companies are to remain competitive: continued fibre roll-out, 5G spectrum payments and 5G roll-out.