Moody’s downgrades outlook on MTN’s Baa2 ratings to negative following $5.2b fine
The ratings agency, Moody’s today October 29, 2015 downgraded MTN’s Baa2 ratings from stable to negative.
According to Moody’s the action follows the announcement on October 26, 2015 that the Nigerian Communications Commission (NCC) has imposed a fine of Naira 1.04 trillion, about $5.2 billion on MTN Nigeria relating to the timing of the disconnections of just over 5.0 million improperly registered subscribers.
“In addition, we have affirmed MTN’s Baa2 global issuer rating, the A1.za national scale issuer rating and the Baa2 rating on the senior unsecured notes issued by MTN (Mauritius) Investments Limited,” the agency said.
The company was fined Naira 200,000 ($1,005) for each unregistered subscriber.
Following the fine, MTN’s shares fell the most in 17 years on the Johannesburg Stock Exchange. MTN’s stock declined more than 12 per cent, the biggest one-day decline since November 1998, to 167 rand.
Moody’s says the fine has affected other MTN ratings as well.
The following are the affected ratings:
Affirmations:
Issuer: MTN Group Limited; Issuer Rating, Affirmed Baa2; Issuer Rating, Affirmed A1.za; Issuer: MTN (Mauritius) Investments Limited; Senior Unsecured Regular Bond/Debenture, Affirmed Baa2
Outlook Actions:
Issuer: MTN Group Limited; Outlook, Changed To Negative From Stable; Issuer: MTN (Mauritius) Investments Limited; Outlook, Changed To Negative From Stable, Moody’s states.
Among others, Moody’s says the rationale for the change in outlook to negative from stable reflects the potential for deterioration in the Group’s credit metrics and liquidity profile if MTN has to pay the full equivalent $5.2 billion fine in Nigeria.
“While there is sufficient headroom in MTN’s consolidated debt/EBITDA metric to absorb additional debt to immediately pay the fine it will reduce MTN’s financial flexibility to absorb other potential event risks,” the agency noted.
MTN executives are reported to be in Nigeria to hold talks with Nigerian regulators over the issue.
Moody’s therefore, notes that the challenges faced with the negotiation process between the NCC and MTN Nigeria which is unlikely to be resolved quickly.
According to Moody’s, a long negotiation process would put a strain on the relationship and interactions with the Nigerian telecoms regulator and disrupt business continuity which would have negative long term consequences on MTN’s Nigerian operations.
By Emmanuel K. Dogbevi