FiberCop: Rome Wasn‘t Built In A Day: Fiber Investment Peaks First, Credit Improvement Follows

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FiberCop: Rome Wasn‘t Built In A Day: Fiber Investment Peaks First, Credit Improvement Follows

plans (recently increased to >€600m), we

expect the market will increasingly price in a more positive credit profile, driving FCF

inflection and deleveraging towards targeted investment grade metrics. By trading into

FIBCOP, investors can pick up an improving credit story with limited call protection;

the bonds carry a short par call window (3-6m ahead of maturity, see Figure 1FiberCopRelativeValue below),

offering upside should the expected credit profile improvement materialize (in particular

the longer duration: €4.75% 2030s, €5.375% 2031s, €5.125% 2032s, €7.5% 2033, and

€5.25% 2055s). Moreover, these benefits are underpinned by a unique infrastructure

asset with implied equity value (acquired for an EV of €18.8bn in 2023 before the

significant Fiber investments), and we forecast peak net debt / EBITDAaL in 2026

before it declines as FiberCop transitions from the capital-intensive build phase to a

highly cash-generative, lower-cost operating model. One notable exception is the 2031

FRNs (E+300bp), which are callable from 27th June 2026 at par. While we don’t

believe FiberCop needs to come to market in the near term, these bonds could be a

target for an opportunistic refinancing. Downside risks to our recommendations include:

i) underperformance against business plan, resulting in deteriorating credit metrics; ii)

consolidation in the Italian fixed access markets, resulting in higher financial leverage;

iii) a change in capital priorities, prioritizing shareholder remuneration over

deleveraging; iv) a change in ownership which does not trigger CoC put.

The most comparable U.S. telecom names include LUMN/LVLT and UNIT.