MTN May Face S&P Downgrade If It Lifts Exposure To Nigeria

S&P Global Ratings has sent a warning to MTN stating that should the telecoms operator increase its relative exposure to Nigeria — the West African country that has demanded billions of dollars from MTN in recent years — its debt will stand at risk of being downgraded.

Following MTN’s recent settlement with Nigerian authorities over alleged dividend repatriations, the rating agency issued a statement this week declaring even though it was unlikely to downgrade the network operator within the next 90 days, it could downgrade the company within the next 12 months.
This would happen if MTN’s debt climbed or if its revenue mix changed and led to greater exposure to Nigeria — the lower rated of its two main markets.

South Africa and Nigeria, however, contribute similar levels of profitability towards the MTN Group.

For now, S&P Global Ratings has said that MTN’s current economic exposures to SA, which holds a foreign currency long-term rating of BB, outweighed its exposures to Nigeria slightly, with its foreign currency long-term rating of B.

The ratings agency also added that MTN’s outlook could be changed back to stable if its relative exposure to South Africa increased.

In December, MTN announced that it had finally reached an agreement with the Central Bank of Nigeria, which had earlier ordered that the operator reverse payments from the country worth approximately $8.1bn. The amount was ultimately decreased to $53m.

Nigeria’s attorney-general, however, still wants MTN to pay $2bn in back taxes. MTN vehemently denies all allegations regarding owed taxes and claims its tax affairs are up to date. The matter is scheduled to be heard in court on February 7.

S&P Global Ratings said that if MTN Nigeria has to pay a settlement or make a large payment, the forecasted metrics will remain within the same range for the current rating level.

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