Moody’s affirms MTN’s Baa3/ ratings, with negative outlook on Nigeria fine payment

Moody'sRatings agency Moody’s today affirmed MTN Group’s Baa3 global issuer rating, the national scale issuer rating and Baa3 rating on the senior unsecured notes issued by MTN Mauritius Investments.

According to Moody’s, the affirmation is based on the view that the fine and payment terms, recently imposed by the Nigerian authorities and agreed to by MTN Nigeria, are within the funding capabilities of MTN Nigeria and will not require funding support from MTN Group.

Moody’s indicates that the affirmation of the Baa3/ issuer ratings follows the announcement on June 10, 2016, that MTN Nigeria has agreed to pay a total cash consideration of NGN330 billion (equivalent to $1.671 billion) over three years to the Federal Government of Nigeria in relation to the failure to disconnect over five million improperly registered subscribers within the stipulated time frame in 2015.

“This is materially lower than the original fine of NGN1.04 trillion ($5.2 billion) imposed on October 26, 2015 and the subsequent reduction in December 2015 to NGN780 billion ($3.9 billion). MTN Nigeria has already paid NGN50 billion on February 24, 2016 leaving the balance of NGN280 billion to be paid over three years,” Moody’s noted.

The agency said it views the resolution of the fine and payment terms as manageable given MTN Nigeria has sufficient cash balances (Naira 290 million, equivalent to $1.6 billion or ZAR24.5 billion as of December 31, 2015) to meet the annual obligations over the next three years.

“It also reflects the view that this paves the way for MTN Nigeria to resume its focus on growing its business in Nigeria,” Moody’s said.

Moody’s however, maintains the outlook at negative, indicating that it is driven by MTN’s weakened liquidity profile resulting from the inability to repatriate dividends from MTN Nigeria over the past six months and utilization of its available
facilities to fund the capital outflows.

By Emmanuel K. Dogbevi

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