Telekom Srbija eyes up to €1.95bn debt expansion as Moody’s assigns B1 rating

Telekom Srbija’s next financing push highlights the growing role of international high-yield markets for large, state-linked companies in Serbia—at a time when telecom investors are demanding clearer evidence of debt sustainability. Moody’s has assigned a B1 credit rating to the company’s planned bond issuance, positioning Telekom Srbija deeper in speculative-grade territory as it looks to expand borrowing capacity up to €1.95bn.

Moody’s B1 rating and a larger borrowing plan

The planned bond issuance comes with Moody’s B1 rating, reflecting both Telekom Srbija’s strong regional market position and elevated leverage metrics. Fitch previously affirmed the company at B+ with a positive outlook, while pointing to expectations that EBITDA leverage could gradually decline toward 5.1x by 2027 from about 7.7x at end-2024.

Earlier approvals had envisaged bond issuance capacity of up to €1.2bn during 2025–2026. The latest expansion toward €1.95bn signals a more aggressive refinancing and investment cycle, increasing the scale of the company’s leverage profile.

After a landmark 2024 eurobond, investors turn to refinancing risk

The new initiative follows Telekom Srbija’s landmark $900m international eurobond issuance completed in late 2024—the first major corporate bond placement from the Western Balkans on international debt markets. The deal reportedly attracted demand exceeding $5.5bn and was initially priced with a 7% coupon before being reduced to roughly 5.9% after currency hedging into euros.

International ratings and investor scrutiny now center on how Telekom Srbija manages its debt trajectory, refinancing exposure and free-cash-flow durability. While the company reported improving operational metrics—including adjusted EBIT growth and positive free cash flow generation—leverage remains elevated relative to regional peers.

A milestone for Serbia’s corporate access—and an indicator for broader confidence

Telekom Srbija’s ratings mark an important milestone for Serbia’s corporate sector: it became the first Western Balkans-headquartered company to secure dual international ratings from both Moody’s and Fitch tied to international bond issuance.

Its ability to access global capital markets repeatedly also carries sovereign implications. Global investor appetite for Telekom Srbija can function as an indirect signal of confidence in Serbia’s wider macroeconomic and institutional environment—particularly as geopolitical uncertainty, higher global interest rates and emerging-market refinancing pressures persist.

Strategy shift boosts growth ambitions but raises balance-sheet pressure

The financing expansion is linked to Telekom Srbija’s broader transformation beyond traditional domestic telecom services. In recent years, the company has expanded its regional telecom and media footprint through acquisitions, infrastructure investment and content distribution, increasingly positioning itself as a regional digital infrastructure operator competing with larger Central European telecommunications groups.

That strategy has materially increased balance-sheet pressure, making debt sustainability a central question for future bond-market access. Going forward, investors are likely to focus not only on expansion plans but also on deleveraging credibility—alongside stable subscriber growth and stronger EBITDA generation—while monitoring disciplined capital allocation.

Tighter conditions across European high-yield telecom

The broader financing backdrop is becoming more challenging for high-yield telecom issuers across Europe. Tighter investor scrutiny is emerging alongside rising refinancing costs, weaker consumer spending and intensifying infrastructure CAPEX requirements tied to fiber and 5G deployment. Telecom operators face the dual task of funding heavy infrastructure while preserving cash generation and maintaining debt sustainability ratios.

Telekom Srbija will therefore need continued proof that its cash flows can support ongoing investment without undermining leverage targets—especially as international high-yield markets become more selective about risk.

The company’s late-2024 eurobond transaction was later recognized as one of the most important telecom financing deals in emerging Europe, winning “Telecom Deal of the Year” recognition within the EMEA telecom financing market.