Re­serve Bank warns of MTN Nige­ria risk

Fi­nan­cial sta­bil­ity re­view finds that if MTN is forced to pay back R114bn, the debt could im­pact on South Africa

Pretoria News - - FRONT PAGE - KA­BELO KHU­MALO ka­belo.khu­

THE SOUTH African Re­serve Bank (Sarb) yes­ter­day warned that MTN’s con­tin­u­ing woes in Nige­ria could rat­tle the lo­cal fi­nan­cial ser­vices sec­tor.

Sarb said in its fi­nan­cial sta­bil­ity re­view that if MTN was forced to pay the Cen­tral Bank of Nige­ria (CBN) the $8.1bn (R113.29bn) it al­legedly repa­tri­ated il­le­gally, the group might strug­gle to pay off its debt, thereby height­en­ing risk to the coun­try’s fi­nan­cial sys­tem.

“Any po­ten­tial im­pact on the South African fi­nan­cial sys­tem aris­ing from this event will de­pend on the even­tual res­o­lu­tion of the mat­ters raised and the MTN Group’s abil­ity to con­tinue meet­ing its debt obli­ga­tions, in­clud­ing those in the South African bank­ing sec­tor,” Sarb said.

“Given the glob­ally in­ter­con­nected na­ture of the South African fi­nan­cial sys­tem, this could in­crease sys­temic risk.”

The of­fice of the Nige­rian at­tor­ney-gen­eral has also given MTN no­tice of its in­ten­tion to re­cover $2bn of taxes re­lat­ing to the im­por­ta­tion of for­eign equip­ment and pay­ments to for­eign sup­pli­ers since 2008.

MTN is chal­leng­ing both mat­ters in court. In Au­gust MTN, the con­ti­nent’s largest mo­bile net­work provider said its debt in­creased to R69.8bn in the six months ended June, com­pared with R57.1bn at the end of last year.

The group said the surge in debt was due to the weaker clos­ing rand and the pay­ment of the fi­nal div­i­dend un­der the pre­vi­ous div­i­dend pol­icy.

MTN has also flagged that it would strug­gle to repa­tri­ate R3.4bn in ac­cu­mu­lated div­i­dends and loans from its Iran joint ven­ture due to the US sanc­tions.

MTN yes­ter­day re­fused to dis­close how much of its near R70bn debt was held by lo­cal banks af­ter the Sarb warned that its multi­bil­lion-dol­lar woes in Nige­ria posed sys­temic risks to the fi­nan­cial sys­tem.

“At the in­terim pe­riod, the group had debt of R69.8bn. Of this, R68.4bn was at the head of­fice, and this was made up of R31.8bn in rand fund­ing and R36.6bn equiv­a­lent in dol­lar fund­ing,” an MTN spokesper­son said.

“Im­por­tantly, though, our rand fund­ing in­cludes both rand bond is­suances through our do­mes­tic medium-term note pro­gramme as well as rand bank fund­ing. In the rand bank fund­ing, we have both South African banks as well as in­ter­na­tional banks con­tribut­ing to the rand debt.”

Nige­rian au­thor­i­ties said yes­ter­day that MTN’s court chal­lenges would be heard next month.

Moody’s In­vestor Ser­vices in Septem­ber cau­tioned that MTN’s in­abil­ity to fully hedge its off­shore op­er­a­tional ex­po­sures bares it to rand volatil­ity and ad­di­tional credit risk.

Moody’s has also placed MTN on re­view for a down­grade to re­flect the un­cer­tainty around the po­ten­tial im­pli­ca­tions of the CBN and Nige­rian at­tor­ney-gen­eral’s an­nounce­ments on MTN’s credit pro­file.

Asief Mo­hamed, chief in­vest­ment of­fi­cer at Aeon In­vest­ment Man­age­ment, said it was im­per­a­tive that MTN sorted out its prob­lems in Nige­ria speed­ily.

“In the un­likely event that MTN is obliged to repa­tri­ate the div­i­dends to Nige­ria, it may put a strain on the MTN Groups fi­nan­cial po­si­tion and its abil­ity to ser­vice its South African debt,” Mo­hamed said.

MTN shares de­clined 2.93 per­cent on the JSE yes­ter­day to close at R86.88.


NIGE­RIAN au­thor­i­ties said yes­ter­day that MTN’s court chal­lenges would be heard next month.

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