A man passes an MTN board in Lagos, Nigeria. Picture: AFP PHOTO/PIUS UTOMI EKPEI
A man passes an MTN board in Lagos, Nigeria. Picture: AFP PHOTO/PIUS UTOMI EKPEI

S&P Global Ratings has warned that it could downgrade MTN's debt if the mobile operator increases its relative exposure to Nigeria. MTN has been at loggerheads with Nigerian authorities in recent years, with the West African state demanding billions of dollars from the operator.

The rating agency said in a statement this week, after MTN reached an agreement with Nigerian authorities over historical dividend repatriations, that it was unlikely to downgrade the network operator in the next 90 days. It also affirmed MTN’s BB+ long-term issuer credit ratings.

But it could downgrade the company in the next 12 months if its debt climbed or its revenue mix shifted “materially and sustainably, leading to greater exposure to Nigeria — the lower rated sovereign of its two main markets”.

In the six months to end-June, MTN generated revenues of R17.2bn from Nigeria, versus R21.2bn from SA. The countries contribute similar levels of profitability towards the group.

For now, S&P Global Ratings said MTN’s economic exposures to SA, which has a foreign currency long-term rating of BB, slightly outweighed exposures to Nigeria, with its foreign currency long-term rating B.

“There remains a two-notch difference between the potential sovereign cap and MTN’s BB+ issuer credit rating,” S&P Global Ratings said.

The ratings agency also said MTN’s outlook could be revised to stable if its relative exposure to SA increased.

In December, MTN said it had reached an agreement with Nigeria’s central bank, which had earlier demanded that the operator reverse payments from the country worth $8.1bn. The number was ultimately reduced to $53m.

However, Nigeria’s attorney-general still wants MTN to pay $2bn in back taxes. MTN claims its tax affairs are up to date and the matter is expected to be heard in court on February 7.

“In the event that MTN Nigeria has to pay a settlement or make a significant payment, we believe that our forecasted metrics would remain within the range for the current rating level,” S&P Global Ratings said.