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Pronto, are the bills in?

David Meade

Securitizing telephone bills could become the new wonder medicine for stricken European telecoms companies to reduce their debt burden. An asset-backed transaction offers the invaluable advantage of not increasing a company's debt ratios - as do normal bonds - and it also generates financing at a much more attractive price, with spreads roughly 20-30 basis points lower than secondary level single-A telecom straight bonds. As for equity, deals are going to be a tough sell for telecom companies with their shares prices at all time lows. They are therefore increasingly looking into selling their future revenues.

This is nothing new. Emer-ging markets telecom compa-nies, notably Mexico's Telmex, as well as US telecoms such as AT&T, Motorola and Sprint have been regular issuers of ABS paper.

Telecom Italia will now become the first European company to take up the idea when, at some point in the first quarter, it will issue a bond that is secured on its telephone bill receivables from individuals and business.

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