S&P lowers outlook on Italy's TIM on revenue, network risks

MILAN, Oct 6 (Reuters) - S&P Global Ratings on Tuesday lowered its outlook on Telecom Italia (TIM) to negative, citing expectations of lower revenue due to the pandemic and a loose grip of the Italian former phone monopolist on its key network asset.

The rating agency said it expected a 11% fall in Telecom Italia revenue this year, driven by weaker domestic service sales and adverse currency fluctuations affecting its Brazilian business.

As a part of a strategy aimed at extracting value from its network asset to cut its debt, TIM in August approved the sale to U.S. investment firm KKR of a 37.5% stake in a newly-created unit where it plans to fold its “secondary” network connecting street cabinets to people’s homes.

Although the transaction could enhance TIM’s fibre investment and strengthen its competitive position in its domestic market, reduced ownership in its secondary network could weaken TIM’s business profile, S&P warned.

Over time, this deal could erode TIM’s incumbent advantage, while creating some dividend leakage, the rating agency said.

TIM had 33.6 billion euros ($39.48 billion) in gross debt as of June. S&P Global rating for TIM debt is BB+. ($1 = 0.8510 euros) (Reporting by Elvira Pollina; editing by Francesca Landini and Mark Heinrich)