Moody's has downgraded the MTN Group's credit rating, following SA's sovereign bond ratings downgrade last week and the downgrade of SA's top five banks on Monday.
Moody's has downgraded the senior unsecured notes issued by MTN (Mauritius) Investments to Ba1 from Baa3, and has assigned the MTN Group a Ba1 corporate family rating (CFR) and a Ba1-PD probability of default rating. It has also withdrawn MTN Group's long-term Baa3 issuer rating but has assigned a "stable outlook".
The ratings agency says the MTN downgrade was driven by the weakening of the South African government's credit profile, and the lowering of the South African sovereign bond rating to Baa3 negative from Baa2 on 9 June, "which reflects the weakening credit profile of South Africa, a key input into our assessment of MTN's overall rating position".
It believes the telecom operator faces a number of headwinds in its key markets, South Africa (Baa3 negative) and Nigeria (B1 stable), including weak macro-economic environments, regulation challenges, local currency weakness and dollar shortages in Nigeria ? which has negatively impacted MTN's overall performance and resulted in weaker credit metrics.
"In the absence of more conservative financial policies, credit metrics will remain under pressure given Moody's expectation these macro-economic headwinds are likely to persist for the next 12 to 18 months," Moody's says in a statement.
It says MTN's global and national scale CFRs reflect the company's strong brand and position as the number two operator in the maturing South African market as well as its leading market position in most of the 22 countries in which it operates. The ratings are further supported by the group's overall high earnings before interest, tax, depreciation and amortisation margin and recent positive net subscriber growth.
Moody's views MTN's liquidity as good for the next 12 to 18 months, with internally generated cash flows and sufficient undrawn committed facilities to meet its capital investments in Nigeria, South Africa and Iran, as well as the company's dividend pay-out.
"The stable outlook reflects our expectation that MTN will preserve its current market positions and current operating margins as well as maintain a strong liquidity profile over the next 12 to 18 months."
On 12 June, Moody's also downgraded to Baa3 (negative outlook) from Baa2 (rating under review outlook), the long-term local- and foreign-currency deposit ratings of Standard Bank, FirstRand, Absa, Nedbank and Investec.
In April, MTN's outlook was downgraded to negative by both S&P and Fitch, although its ratings remained unchanged.
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