Fitch assigns BB- rating to TalkTalk long-term debt

10th Jan 2017 14:19

(ShareCast News) - Analysts at Fitch assigned a 'BB-' rating to TalkTalk's proposed new unsecured notes, the proceeds from which were to be used to repay a part of its short-term debt under its revolving credit facilities.Fitch dubbed the telecom firm's market position as a niche "value-for-money" operator in the UK telecoms market as "sustainable", highlighting the opportunities for top-line growth from greater demand for data and product generation, especially in the corporate space.Furthermore, the potential existed for the company's Making TalkTalk Simpler (MTTS) programme to gradually increase the firm's profitability over the next three years.There was also room to improve the company's margins, a "favourable" regulatory framework was in place and the roll-out of fibre and and convergence of bundled products were likely to throw up new opportunities for TalkTalk.On the other side of the ledger, TalkTalk's reliance in regulated BT wholesale products meant its profitability was below the average for the sector, Fitch said."TalkTalk has flexibility in balancing network investments and dividend distributions, but its weak FCF (post-dividend) profile is a constraining rating factor," it said.Nonetheless, Fitch went on to say: "we believe TalkTalk has the flexibility to manage its financial policy to accommodate further investments including in Fibre-to-the-Premise (FTTP), and dividend distributions to maintain a neutral to positive FCF. Opportunistic bolt-on acquisitions and/or investments might result in FCF being temporarily negative and net leverage above its stated target."As of 1416 GMT shares in TalkTalk were down 1.97% to 168.5p.