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MTN’s credit rating upgraded amid debt reduction efforts

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Rating agency S&P has upgraded mobile operator MTN’s credit rating, as the company has made strides in reducing its debt.

In a statement, MTN, which is Africa’s largest mobile operator, says: “MTN Group is pleased to announce that progress in reducing our holding company debt has been recognised by rating agency S&P Global Ratings, which has upgraded the group’s standalone credit rating to investment grade.”

S&P revised MTN’s standalone credit profile to BBB- from BB+, citing progress made in deleveraging the balance sheet and on the expectation that MTN will not return to higher levels of leverage.

According to MTN, a standalone rating excludes S&P’s view of government influence and sovereign risk.

MTN Group in August reported a strong performance for the first half of 2021 – exceeding most medium-term targets, reducing debt, advancing digital and financial inclusion, and cutting the cost to communicate across Africa.

At the time, the company reported it had reduced its debt from R43.3 billion to R36.7 billion. As at June last year, the company’s net debt stood at R70.9 billion.

“We made good progress in reducing our holding company debt, which declined to R36.7 billion from R43.3 billion, and the holding company leverage reduced to 1.4x in the half.”

According to the telco, this was boosted by cash inflows received from its operating companies of R9.3 billion, which included R4 billion from Nigeria, as well as R1.8 billion in proceeds from the sale of its stake in Belgacom International Carrier Services.

“We are very encouraged that our work to reduce debt has been recognised, with a move up to investment grade,” says MTN Group chief financial officer Tsholofelo Molefe in yesterday’s statement.

“Faster deleveraging of our holding company balance sheet is a critical element of our Ambition 2025, and today’s announcement is another important indicator that we are on track with the delivery of our strategy.”

The telecommunications company points out that the last time MTN Group had an investment grade rating was five years ago, in 2016.

It adds that by reducing debt, MTN has greater financial flexibility to take advantage of the attractive growth opportunities it has identified.

“Central to reducing debt is our asset realisation programme which aims to realise proceeds of more than R25 billion by 2025,” says MTN.

Former CEO Rob Shuter unveiled MTN’s asset realisation programme in March 2019, in which assets that were not of long-term strategic value would be sold when market conditions were conducive.

Earlier this month, MTN Uganda announced its intention to proceed with an initial public offering (IPO) and subsequently list on the Uganda Securities Exchange.

This followed the requisite approval by the Capital Markets Authority and Uganda Securities Exchange for MTN Group to sell 20% of its shareholding in MTN Uganda to the public.

It is expected that MTN Group, which holds 96% of MTN Uganda, will raise about R18 billion from the IPO.

Also this month, IHS Towers, in which MTN held 29% of common equity as at 30 June 2021, notified its shareholders about its own IPO of 22.5 million shares.

This after IHS Towers was given the green light to list its ordinary shares on the New York Stock Exchange under the ticker symbol “IHS”.

MTN expects to raise over R26 billion from the IHS IPO, with the price currently estimated to be between $21 and $24 per share.

“In line with our Ambition 2025, our medium-term guidance includes a target to achieve a leverage ratio of the holding company of less than 1.5x. At the end of June 2021, MTN’s holding company leverage improved to 1.4x from 2.2x at end-December 2020,” said the company yesterday.

“This was supported by significant progress in upstreaming cash from our operating companies, including from Nigeria.”

On Friday, S&P also affirmed MTN’s BB- long-term issuer credit rating, with a stable outlook, the company concludes.

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