{"id":35375,"date":"2023-08-09T00:01:53","date_gmt":"2023-08-08T23:01:53","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=35375"},"modified":"2023-08-08T16:12:05","modified_gmt":"2023-08-08T15:12:05","slug":"fitch-downgrades-talktalks-long-term-issuer-default-rating-to-b","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2023\/08\/fitch-downgrades-talktalks-long-term-issuer-default-rating-to-b.html","title":{"rendered":"Fitch Downgrades TalkTalk&#8217;s Long-Term Issuer Default Rating to B-"},"content":{"rendered":"<p>American credit rating agency Fitch has downgraded <a class=\"shortlink shortlink-59\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/tt\" target=\"_blank\" rel=\"nofollow\" title=\"talktalk\">TalkTalk<\/a>&#8217;s Long-Term Issuer Default Rating to B- from B and put the UK broadband ISP on Rating Watch Negative (RWN). The move follows recent confirmation that the internet provider, under pressure from its debts, is to be broken up and sold off in pieces (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2023\/07\/debt-pressures-pushing-budget-uk-isp-talktalk-toward-breakup.html\">here<\/a>).<!--more--><\/p>\n<p>The latest <a href=\"https:\/\/www.fitchratings.com\/research\/corporate-finance\/fitch-downgrades-talktalk-to-b-places-on-rating-watch-negative-07-08-2023\" target=\"_blank\" rel=\"noopener\">Fitch Ratings<\/a> report states its belief that the group&#8217;s on-net base has &#8220;<em>continued to decline consistently<\/em>&#8220;, while their recent inflation-adjusted price increases of CPI plus 3.7% &#8220;<em>have yet to bring a meaningful benefit<\/em>&#8221; for revenue and EBITDA, but they may still bring some benefit further down the road.<\/p>\n<div class=\"bq2\"><strong>NOTE:<\/strong> The ratings&#8217; agency also downgraded their secured debt rating to &#8216;B-&#8216;\/&#8217;RR4&#8217; from &#8216;B&#8217;\/&#8217;RR4.<\/div>\n<p>&#8220;<em>[<a class=\"shortlink shortlink-59\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/tt\" target=\"_blank\" rel=\"nofollow\" title=\"talktalk\">TalkTalk<\/a> Group] is in a tough trading environment. Vulnerability to high input costs from inflation-linked <a class=\"shortlink shortlink-46 shortlink-chref\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/openreach\" target=\"_blank\" rel=\"\" title=\"openreach\" data-chref=\"https:\/\/www.openreach.co.uk\">Openreach<\/a> wholesale costs and operating cost inflation are exacerbated by a declining consumer base and price competition, limiting its ability to fully pass on inflation and depressing its margins,<\/em>&#8221; added the report.<\/p>\n<p>Apparently, TalkTalk plan to monetise some assets (e.g. selling <a class=\"shortlink shortlink-105 shortlink-chref\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/ip\" target=\"_blank\" rel=\"\" title=\"internet protocol address\" data-chref=\"https:\/\/www.ispreview.co.uk\/jargon\/jargon_detail.php?IP---Internet-Protocol-42\">IP<\/a> addresses) to help tackle their problems, although Fitch expects them to remain structurally reliant on their <strong>Revolving Credit Facility<\/strong> (RCF) to fund operations over the next 3 years and notes that the ISP is also in advanced negotiations to sell their B2BDirect business (expected to conclude within the next 2 months).<\/p>\n<p>&#8220;<em>Although the sale will ease short term liquidity pressure, we believe further asset monetisation or equity support is necessary to refinance and enable TTG to execute its strategic priorities<\/em>,&#8221; added Fitch.<\/p>\n<blockquote class=\"bq1\"><p><strong>A Spokesperson for TalkTalk told ISPreview:<\/strong><\/p>\n<p>&#8220;TalkTalk Group is demerging its Wholesale and Consumer divisions to allow the two businesses to work independently, and invest and grow in their respective markets. The shareholders are excited about the potential for both businesses and fully supportive of their future and refinancing.&#8221;<\/p><\/blockquote>\n<p>However, Fitch&#8217;s report did note that TalkTalk also had additional options to improve its business under a more sustainable capital structure, such as their plans for placing a greater focus on customer retention and upselling speed tiers with full fibre (<a class=\"shortlink shortlink-110 shortlink-chref\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/fttp\" target=\"_blank\" rel=\"\" title=\"fttp\" data-chref=\"https:\/\/www.ispreview.co.uk\/broadband_fibre_optic.php\">FTTP<\/a>) following the transition to <a class=\"shortlink shortlink-46 shortlink-chref\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/openreach\" target=\"_blank\" rel=\"\" title=\"openreach\" data-chref=\"https:\/\/www.openreach.co.uk\">Openreach<\/a>&#8217;s new Equinox 2 price discounts.<\/p>\n<p>The provider&#8217;s Ethernet business, at least for so long as it remains a part of the group, also continues to show a &#8220;<em>good growth trajectory and generates significantly higher average revenue per user<\/em>&#8220;. An increase in the alternative network (altnet) mix on their Wholesale platform may thus provide a tangible opportunity to expand coverage and mitigate the impact of higher wholesale fibre costs (i.e. altnets are reportedly pricing one-third lower than Openreach). But that does depend on the rate and scale of altnet build, which is currently the subject of some turbulence.<\/p>\n<p>Suffice to say, the next few months are going to be a busy period for TalkTalk, as it tries to claw its way back toward some stability.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>American credit rating agency Fitch has downgraded TalkTalk&#8217;s Long-Term Issuer Default Rating to B- from B and put the UK broadband ISP on Rating Watch Negative (RWN). The move follows recent confirmation that the internet provider, under pressure from its debts, is to be broken up and sold off in pieces (here).<\/p>\n","protected":false},"author":1,"featured_media":28642,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[472,74],"class_list":["post-35375","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-business","tag-talktalk"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Fitch Downgrades TalkTalk&#039;s Long-Term Issuer Default Rating to B- ISPreview UK<\/title>\n<meta name=\"description\" content=\"American credit rating agency Fitch has downgraded TalkTalk&#039;s Long-Term Issuer Default Rating to B- from B and put the UK broadband 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