State-owned telecommunications provider Telekom Srbija is set to undertake a significant debt expansion, potentially reaching €1.95 billion. This initiative represents one of the most substantial corporate financing efforts ever initiated by a Serbian firm. The company has received a B1 credit rating from Moody’s Investors Service for its planned bond issuance, which positions it deeper into international high-yield capital markets and highlights its growing reliance on external refinancing options.
This financing initiative follows Telekom Srbija’s notable $900 million eurobond issuance completed in late 2024, which marked the first major corporate bond placement from the Western Balkans in international debt markets. The transaction garnered demand exceeding $5.5 billion, enabling the company to initially price the bond at a 7% coupon, which was later reduced to approximately 5.9% after currency hedging into euros.
The proposed financing framework significantly enhances Telekom Srbija’s leverage profile. Previously approved plans anticipated a bond issuance capacity of up to €1.2 billion during the 2025–2026 period; however, the new target of €1.95 billion indicates a more aggressive approach to refinancing and investment.
Moody’s B1 rating places Telekom Srbija in speculative-grade territory, reflecting its strong market position in the region alongside elevated leverage metrics. Fitch has previously rated the company at B+ with a positive outlook, suggesting that EBITDA leverage could gradually decrease to around 5.1x by 2027 from approximately 7.7x at the end of 2024.
This development signifies an important milestone for Serbia’s corporate sector, as Telekom Srbija becomes the first company headquartered in the Western Balkans to achieve dual international ratings from both Moody’s and Fitch linked to international bond issuance.
The rationale behind this financing expansion is part of a broader strategic transformation for Telekom Srbija. In recent years, the company has aggressively expanded its regional presence in telecommunications and media through acquisitions and infrastructure investments. It is positioning itself as a regional digital infrastructure operator, competing with larger Central European telecommunications firms.
However, this strategy has led to increased pressure on its balance sheet. While operational metrics such as adjusted EBIT growth and positive free cash flow generation have improved, leverage remains high compared to regional competitors. International investors and rating agencies are closely monitoring Telekom Srbija’s debt trajectory, refinancing exposure, and sustainability of free cash flow.
The refinancing structure also reflects shifting dynamics within Serbian capital markets. Domestic banks are increasingly unable to meet the financing needs for large-scale infrastructure and telecom investments pursued by state-linked enterprises. As a result, international bond markets are becoming essential not only for refinancing existing debt but also for funding expansions in fiber networks, digital infrastructure upgrades, media acquisitions, and regional consolidation efforts.
Telekom Srbija’s ability to access international debt markets repeatedly has broader implications for Serbia’s economy. The interest shown by global investors serves as an indirect indicator of confidence in Serbia’s macroeconomic and institutional environment. Successful international placements suggest that investors remain willing to take on Serbian corporate risk despite geopolitical uncertainties, rising global interest rates, and ongoing refinancing challenges faced by emerging markets.
Nonetheless, the current financing landscape is becoming increasingly challenging. High-yield telecom issuers across Europe are experiencing heightened scrutiny from investors amid rising refinancing costs, declining consumer spending, and escalating infrastructure capital expenditure requirements associated with fiber and 5G deployment.
For Telekom Srbija, future access to bond markets will largely depend on demonstrating stable subscriber growth, enhanced EBITDA generation, and disciplined capital allocation strategies. Investors are likely to prioritize deleveraging credibility over mere expansion in their evaluations moving forward.
The company’s eurobond transaction in 2024 was later recognized as one of the most significant telecom financing deals in emerging Europe, earning accolades as the “Telecom Deal of the Year” within the EMEA telecom financing sector.
