Quoting a statement by the agency, El Economista reports that the goal of the Spanish incumbent is to reduce the ratio of its net financial debt to EBITDA from 2.91 at the end of 2015 to 2.35, with asset sales playing an important part in the process.
Fitch adds that this could be difficult to implement in the short terms if the company wants to optimise the value of its investments, with M&As an “event risk”.
Telefónica has been considering selling shares in its UK division or newly create subsidiary Telxius.
However, Fitch also notes that the recent weakness of the British pound will have a “minimal impact” on Telefónica’s credit metrics, reflecting the “close relationship” between the cash flow free and debt in pounds sterling.
It also says that while Telefónica’s underlying operating performance in its core business in Spain, Germany and Latin America continues to be good, generating cash flow is limited by investments in fixed broadband and mobile, along with pressure on EBITDA by market volaility in Latin American currencies.