Madrid, January 21, 2019 -- Moody's Investors Service ("Moody's") has today confirmed MTN Group Limited's
(MTN or Group) Ba1 corporate family rating (CFR), Ba1-PD
probability of default rating (PDR) and the Aa3.za national scale
corporate family rating. Moody's has also confirmed the Ba1 rating
on all the senior unsecured notes issued by MTN (Mauritius) Investments
Limited. The rating outlook is negative.
This action follows MTN's announcement on 24 December 2018 that
MTN Nigeria's regulatory dispute with the Central Bank of Nigeria
(CBN) has reached an equitable resolution. This rating action concludes
the review for downgrade initiated on 6 September 2018.
RATINGS RATIONALE
Moody's has today confirmed MTN Group's Ba1 ratings following
MTN's announcement that it has reached a settlement with respect
to allegations by the CBN on MTN Nigeria's improper repatriation
of $8.1 billion between 2007 and 2015. The resolution
involves MTN Nigeria paying $52.6 million to CBN without
admission of liability and CBN regularizing all disputed Certificates
of Capital Importation (CCI). This settlement removes uncertainty
and substantially reduces the downside risk to MTN's credit profile.
There are no other conditions attached to the settlement and the $52.6
million has been paid by MTN Nigeria's internal cash sources.
Moody's understands that MTN Nigeria has had no other adverse impact
either financially or operationally from recent events.
A degree of event risk however still remains, since the $2
billion tax dispute with the Nigerian Attorney General (NAG) is outstanding.
MTN Nigeria's internal assessment is that it has paid $700 million
in taxes over the disputed period and that there is no shortfall in payments.
A court hearing is scheduled for 7 February 2019 in the Nigeria High Court.
Recent developments indicate heightened regulatory risk in Nigeria (B2
stable) for MTN, which is a key market for the Group and contributing
one-third of group EBITDA for the last 12 months (LTM) ending 30
June 2018. The negative outlook reflects that downside risks may
persist over the near time. This is exacerbated by limited visibility
into the institutional decision-making in Nigeria that has led
to recent allegations against MTN. There is uncertainty around
the timing for any resolution related with the NAG matter, and general
elections in Nigeria slated for 16 February 2019 and a transition to potentially
a new government may create delays to a resolution.
MTN currently has sufficient liquidity to repay approaching debt maturities
over the next 12 to 18 months with the next sizable refinancing wall only
in 2021. There is also sufficient covenant headroom under its revolving
credit facilities, with the tightest being leverage ratio covenant
(consolidated total net borrowings/adjusted consolidated EBITDA) at 1.6x
as of 30 June 2018 compared to a threshold of 2.5x. Moody's
adjusted consolidated debt/EBITDA stood at 3.0x as of 30 June 2018
(LTM) and is forecasted to be 2.8x for 2018YE.
NEGATIVE OUTLOOK
The negative outlook reflects Moody's view that MTN is currently
exposed to heightened regulatory event risks in Nigeria. There
is uncertainty around whether this is a temporary situation or a more
permanent part of the domestic operating environment.
Moody's guidance for a rating downgrade includes consolidated debt/EBITDA
trending towards the 3.5x level, which Moody's forecasts
will unlikely be reached even in a scenario where MTN Nigeria is required
to pay a substantial amount as part of the tax dispute. Nevertheless,
such an event could signal a higher degree of regulatory risk in Nigeria
than what is currently incorporated in the Ba1 rating. Moody's
will continue to monitor developments in Nigeria, which will shape
its view on the ratings.
WHAT COULD CHANGE THE RATING UP / DOWN
In the absence of improving sovereign ratings within the major markets
in which MTN operates (such as South Africa, Nigeria and Ghana),
MTN's ratings are unlikely to be upgraded to Baa3. However,
Moody's would consider an upgrade if MTN re-establishes a track
record of dividends being up-streamed from key markets such that
total debt to EBITDA on a consolidated or at MTN Holdings level were to
trend towards 1.5x and MTN's consolidated EBITDA margin was on
an improving trend. MTN Holdings is the holding company under MTN
Group which directly or indirectly is the shareholder of all of MTN's
operating companies.
The ratings could be downgraded following (1) lower up-streaming
of hard-currency dividends or cash flows from MTN's non-South
African operations which might result in higher leverage and weaker liquidity
developing over time at the MTN Holdings level; or (2) weakening
of sovereign ratings or greater degree of regulatory risk in key markets.
Quantitatively, downward pressure would arise if MTN's consolidated
EBITDA margin was sustained below 35% and/or total debt to EBITDA
on a consolidated basis or in MTN Nigeria or MTN South Africa or at MTN
Holdings level were to trend towards 3.5x.
LIST OF AFFECTED RATINGS
Confirmations:
..Issuer: MTN Group Limited
.... Probability of Default Rating,
Confirmed at Ba1-PD
.... Corporate Family Rating, Confirmed
at Ba1
.... NSR Corporate Family Rating, Confirmed
at Aa3.za
..Issuer: MTN (Mauritius) Investments Limited
....BACKED Senior Unsecured Regular Bond/Debenture,
Confirmed at Ba1
Outlook Actions:
..Issuer: MTN Group Limited
....Outlook, Changed To Negative From
Rating Under Review
..Issuer: MTN (Mauritius) Investments Limited
....Outlook, Changed To Negative From
Rating Under Review
The principal methodology used in these ratings was Telecommunications
Service Providers published in January 2017. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1113601.
The Local Market analyst for these ratings is Rehan Akbar, +971
(423) 795-65.
MTN Group Limited, based in South Africa, is the largest African-based
mobile telecommunications operator in terms of subscriber base and revenues.
Operating since 1994, MTN has leading market positions (No.
1 or 2) in 22 African and Middle Eastern countries with a total subscriber
base of 223 million, as of 30 June 2018. Its key markets,
South Africa and Nigeria, combined contribute 66% to consolidated
EBITDA.
For the last twelve months to 30 June 2018, MTN reported Group consolidated
revenue of ZAR130.8 billion (approximately USD10.2 billion)
and Moody's adjusted EBITDA of ZAR54.9 billion (approximately USD4.2
billion).
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Laura Perez Martinez
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Mario Santangelo
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
