"The rating on RCS & RDS is constrained by our view of increasing competition in its core markets of operation, Romania and Hungary, as market players are focused on competing on bundled offers to attract customers," said Standard & Poor's credit analyst Michael O'Brien.

The ratings are also constrained by RCS & RDS's weak free cash flow generation to date, given its high level of network investments. In addition, the company faces the need to refinance significant amounts of debt compared with what we consider a relatively low, but increasing, level of free cash flow generation over the next three years.