Telkom and MTN have received positive credit ratings from rating agency Moody’s Investors Service after strong financial showing, including prudent financial policies and strong credit metrics.
Telkom announced to shareholders yesterday that Moody’s had affirmed its corporate family rating of Ba2 and changed the outlook to ‘stable’ from ‘negative’.
Similarly, the rating agency upgraded MTN’s credit rating outlook to ‘stable’ from ‘negative’, in line with its rerating of the South African government.
The current positive ratings for Telkom and MTN are essential, as they tell potential shareholders and banks the companies are worth investing in and will be able to pay back any bank loan they had taken.
Commenting on its rating, Telkom says: “This ratings action on Telkom is a direct consequence of the sovereign action, given Telkom’s operational concentration in South Africa and its credit linkage to the government. Moody’s notes Telkom’s strong operational and financial performance since COVID-19, its prudent financial policies, strong credit metrics and good liquidity.”
The telco adds Moody’s will continue to monitor performance, given the low growth environment and increased competition in mobile telecommunication.
MTN Group CEO Ralph Mupita welcomed the latest ratings, saying: “As a company domiciled in and with strong credit linkages to South Africa, our company credit rating has benefited from Moody’s decision to upgrade the sovereign’s outlook to stable from negative.
“However, we are particularly encouraged that our work to deleverage the business faster and our strong financial performance have also been recognised by Moody’s.”
In March, MTN Group’s 2021 results showed an 18.3% increase in service revenue in constant-currency terms to R171.8 billion and an improvement in the holding company (Holdco) leverage to 1.0x from 2.2x in 2020, as Holdco net debt reduced to R30.1 billion from R43.3 billion.
This, MTN Group CFO Tsholofelo Molefe says, is in line with Africa’s biggest mobile operator’s Ambition 2025 strategy.
“We are committed to faster deleveraging of the Holdco balance sheet, which gives us the financial flexibility to take advantage of the attractive growth opportunities we have identified. Moody’s upgrade to our outlook encourages us that we are on track with the delivery of our strategy.”
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