Standard & Poor’s Ratings Services has affirmed its ‘BBB-‘ long-term corporate credit ratings on MTN Group.<\/p>\n
The outlook is negative, reflecting the uncertainty regarding the final amount of the fine and increasing country risk in Nigeria and South Africa, the ratings firm said.<\/p>\n
Standard & Poor’s affirmed its ‘zaAA-‘ South Africa national scale ratings on MTN Group and also affirmed its ‘BBB-‘ issue ratings on senior unsecured debt issued by MTN Group.<\/p>\n
“We removed all the ratings from CreditWatch, where we placed them with
\nnegative implications on October 29, 2015,” it said.<\/p>\n
“The affirmation reflects our view that MTN’s Standard & Poor’s-adjusted leverage (debt to EBITDA) will remain below 1.5x, including the company’s R9.3 billion provision related to the Nigerian Communication Commission (NCC)’s pending fine,” it said.<\/p>\n
S&P said it anticipates a more conservative dividend policy as it maintains sufficient liquidity to address Nigeria country and regulatory risk.<\/p>\n
“We also note increased sovereign risk related to Nigeria and South Africa, which contribute, respectively, 35% and 27% of MTN’s revenue. Both sovereign ratings carry negative outlooks, and we currently cap our rating on MTN at two notches above the blended sovereign rating on Nigeria and South Africa,” it said.<\/p>\n
S&P noted that the NCC’s fine, related to delayed disconnections of unregistered subscribers, has been reduced to $3.9 billion from $5.2 billion. MTN Nigeria has already made a $250 million good-faith payment to the NCC, and the two are negotiating the final fine amount, the terms of payment, and the time frame in which it should be paid.<\/p>\n
The ratings agency said its assessment of MTN’s business risk profile is supported by the group’s leading market positions in 15 of the 22 countries where it operates; its geographic diversity; licenses for third-generation and long-term evolution technology; more than 230 million subscribers; and growing markets that provide potential for continued, albeit unpredictable, revenue and EBITDA growth.<\/p>\n
“We could lower the ratings on MTN if a substantially higher regulatory fine increases our forecast adjusted leverage ratio above 1.5x for a prolonged period, or if the time frame for payment weakens MTN’s liquidity to an extent that we do not believe MTN can cope with a sovereign stress, which is necessary for a rating above the blended sovereign rating,” S&P said.<\/p>\n
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