Moody’s lowers MTN’s rating outlook to negative on $5.2bn Nigeria fine

Moody’s rating agency changed the outlook on MTN Group’s credit ratings to yesterday, citing the potential impact of a fine by the Nigerian telecoms regulator on the South African mobile operator’s finances.
Shares in MTN have dropped 19 per cent so far this week, hitting a year-low of 150.42 after the Nigerian Communications Commission (NCC) on Monday imposed the penalty for failing to disconnect users with unregistered SIM cards.
“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,” Moody’s Investors Service said in a note.
MTN, Africa’s biggest mobile phone company, maintains Moody’s Baa2 rating, or two notches above junk status.
Though Moody’s said MTN has sufficient headroom to absorb additional debt to pay the fine, it would reduce the company’s financial flexibility to absorb other potential risks.
Nigeria is MTN’s largest market and accounts for around a third of the firm’s revenue. Sources have told Reuters that the company is in talks to try to reduce the fine.
Moody’s said that the negotiations between MTN’s Nigerian unit and the regulator are unlikely to be resolved quickly.
“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,” the rating agency said.
MTN shares were down 1.37 per cent at 153.71