S&P Downgrades Vodafone Rating To BBB On Liberty Global Deal

(Alliance News) - S&P Global Ratings on Thursday downgraded Vodafone Group PLC's issuer and issue ...

Alliance News 1 August, 2019 | 2:38PM
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(Alliance News) - S&P Global Ratings on Thursday downgraded Vodafone Group PLC's issuer and issue ratings to BBB from BBB+, following the completion of its largely debt-financed acquisition of Liberty Global PLC assets.

Shares in the FTSE 100-listed telecommunications group were up 1.0% at 151.62 pence on Thursday in London.

The credit agency has also retained its stable outlook for Vodafone following the deal.

Earlier on Thursday, Vodafone announced the completion of its acquisition of Liberty Global's operations in Germany, Czech Republic, Hungary and Romania for the enterprise value of EUR18.4 billion.

S&P said that it views the Liberty Global acquisition as positive for Vodafone's competitive position in the German market, but due to the transaction scale and the group's existing position in the country, the transaction does not change the agency's view of its business risk.

S&P forecasts that Vodafone's adjusted debt-to-earnings ratio before interest, taxes, depreciation and amortisation will peak at 3.4 times at the end of its 2020 financial year.

The ratio includes the EUR2.14 billion of cash that will come from Vodafone's merger of its transmission towers in Italy into INWIT SpA, the towers unit of Telecom Italia.

"However, we expect no material effect on our S&P Global Ratings-adjusted ratios as we assume that the cash benefit will be largely offset by the expected capitalization of the lease liability," S&P said.

"We generally do not view the potential partial disposal of tower assets as significantly improving the financial risk profile on an S&P Global Ratings-adjusted basis because the towers are a long-term critical infrastructure for the operations," the agency added.

The stable outlook, meanwhile reflects the agency's expectation that Vodafone can reduce adjusted leverage from the 3.4x peak in 2020, driven by a positive Ebitda rise from cost efficiencies and synergies with Liberty Global subsidiary Unitymedia.

There is also the chance of positive cash flow generation of EUR1 billion in the 2021 financial year on the completion of several 5G spectrum auctions, Moody's noted.

By Dayo Laniyan; dayolaniyan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Vodafone Group PLC 107.66 GBX 0.30

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