MTN’s Nigerian fine forces Moody’s hand
MTN Group has had its credit rating cut by Moody’s Investors Service because of the uncertainty regarding a $3.9bn fine in Nigeria, its largest market.
The rating was lowered to Baa3 from Baa2, Ivan Palacios, an analyst at Moody’s in Madrid, said on Tuesday. The outlook is negative, signalling further rate cuts are possible.
Fitch cut MTN’s rating one level to BBB- last week because of risks in Nigeria and SA. The outlook remains stable at Fitch. Africa’s largest phone company has a BBB- rating at Standard & Poor’s.
The change reflected “the increased operational and sovereign risks from one of its key markets, Nigeria”, Mr Palacios said. “The outlook could be stabilised if matters surrounding the Nigerian fine are clarified and resolved with limited or manageable implications to MTN’s Nigerian and group operations as well as to their credit and liquidity profiles.”
Nigeria’s telecommunications regulator has fined MTN $3.9bn for failing to switch off unregistered cellular customers — a revision from an original penalty of $5.2bn.
MTN Group chairman Phuthuma Nhleko has been running the company and leading talks over the fine with Nigeria’s authorities since CEO Sifiso Dabengwa resigned last month.
The company’s value has dropped by about a quarter since the penalty was announced in October and is heading for its first year of losses since 2008.
Moody’s said the negative outlook reflected the ongoing uncertainty surrounding the fine imposed by the Nigerian Communications Commission (NCC) and the possible effect on MTN’s liquidity profile given that at this point it did not have funds readily available to immediately pay the fine.
“At this time, there remains a range of possible outcomes which will have different consequences on MTN’s credit profile. As a result of the uncertainty, it is difficult to estimate the timing and the final outcome of the discussions,” the ratings agency said.
“Moody’s will monitor the developments with specific focus on the speedy resolution with the NCC on the final fine amount, agreed-upon terms and conditions, as well as any mitigating measures that the group can put in place.”