TIM is up 50% this year and S&P just gave it another boost

If you haven’t been paying attention to Telecom Italia in 2026, the numbers might surprise you. The stock is up 50% since January, making it one of the best performers on the FTSE MIB. Today it added another 1.27%, trading at €0.76, with a near 9% gain over the past month alone. And the latest catalyst is a meaningful one: S&P Global Ratings just upgraded the company’s credit rating.

What S&P actually did

The agency lifted TIM’s rating one notch, from BB to BB+, bringing the company tantalizingly close to investment grade territory. This isn’t a routine review, it reflects S&P’s recognition that TIM has spent the past two years consistently hitting its financial targets following the separation of its fixed-line network infrastructure (NetCo).

The key metrics tell the story. The net debt-to-EBITDA ratio has fallen to around 3.5x, a significant improvement from where the company stood just a few years ago. Free operating cash flow as a percentage of debt reached 5% in 2025, confirming that the restructuring isn’t just producing cleaner accounting, but actual cash generation.

For rating agencies, that combination, credible deleveraging plus real cash conversion — is exactly what drives upgrades.

Three engines powering the improvement

S&P didn’t just reward the balance sheet cleanup. The agency also highlighted several operational factors it expects to sustain TIM’s progress over the next two years.

Brazil is the standout. TIM’s South American subsidiary has become one of the group’s most reliable growth drivers, posting strong revenue and profitability trends that contribute meaningfully to consolidated results. It’s the kind of diversification that makes the overall story more resilient.

The Enterprise segment is the second pillar. TIM’s business and public administration division is benefiting from rising demand for digital services, cloud infrastructure, and cybersecurity, areas that carry structurally higher margins than traditional voice and connectivity services.

Then there’s the domestic market, which has historically been a source of concern rather than comfort. S&P acknowledges that Italian telecoms remains competitive, but notes a more rational pricing environment compared to the aggressive price wars of previous years. Crucially, TIM’s average revenue per user (ARPU) is improving, a key indicator that the company is moving toward quality growth rather than just defending market share.

The investment grade question

The BB+ rating matters beyond the symbolic. TIM is now one notch away from investment grade, a threshold that would open the door to a significantly broader pool of institutional investors and potentially more favorable financing conditions.

S&P’s projections for 2026–2027 point in that direction. The agency sees adjusted leverage approaching 3x EBITDA and free operating cash flow to debt potentially reaching around 8%, metrics that would comfortably support a further upgrade. Other major rating agencies have also moved in a more positive direction in recent weeks, reinforcing the narrative of a company on a credible upward trajectory.

For investors, the calculation is becoming clearer: TIM is no longer just a turnaround story. It’s starting to look like a company in the late stages of a credit rehabilitation, one where the next upgrade could bring a new wave of institutional buying.

What we think

A 50% year-to-date gain is the kind of number that makes cautious investors nervous about chasing the trade. But the S&P upgrade isn’t momentum, it’s fundamental validation. The deleveraging is real, the cash generation is improving, and the path to investment grade is no longer theoretical. The question now is whether the operational progress in Brazil and Enterprise can keep pace with a market that’s already pricing in a lot of good news.