Fitch rates TIM Hellas notes B+

Fitch Ratings said it affirmed TIM Hellas Telecommunications SA's B senior unsecured debt rating and B short-term debt rating following the finalization of the acquisition of Q-Telecom, which will take place on Tuesday.

Fitch also assigned a B+ rating to the €200 million senior secured floating-rate notes issued by Hellas Telecommunications (Luxembourg) V in the form of a tap issue to TIM Hellas' existing senior secured floating-rate notes to fund the acquisition of Q Telecom.

The outlook is stable.

The acquisition values Q-Telecom at €350 million, including €25 million of existing debt to be refinanced, and is to be funded through a combination of cash, additional equity and additional debt.

In Fitch's view, the combination of TIM Hellas and Q-Telecom should benefit TIM Hellas' operational risk profile. A gradual transfer of Q-Telecom's subscribers onto TIM Hellas' network should generate incremental EBITDA as the company leverages its largely fixed-cost base. Perhaps more importantly, the consolidation of the third and fourth operator in the market could significantly reduce pricing pressure.

However, running a combined business with two separate brands in a way that would realize the potential synergies without damaging Q-Telecom's growth potential represents a significant challenge for management, the agency said. Furthermore, improvements in financial performance and cash flow generation may only materialize in the medium term.

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