MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK
MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK

Ratings agency S&P has upgraded MTN’s credit rating to investment grade as Africa’s largest mobile operator continues its effort to bring down its borrowings.

On Monday MTN said S&P had revised its stand-alone credit profile to BBB- from BB+, citing progress in deleveraging the balance sheet and on the expectation that the mobile telecommunications operator will not return to higher levels of leverage.

A stand-alone rating excludes S&P’s view of government influence and sovereign risk.

MTN boss Ralph Mupita and his team have been working to reduce the group’s debt, an issue that has plagued it for years because of an inability to repatriate funds from countries such as Nigeria and Iran. In the half year to June, MTN cut its borrowings to R36.7bn from R43bn. As a ratio to equity, this has come down to 1.4, ahead of guidance of 1.5.

As part of the mission to cut debt and also streamline its business, the company set out to raise R25bn from the sale of noncore assets. 

Earlier this month, IHS Towers, a Nigeria-born network tower company, started the process for a stock market flotation in the US, putting MTN — which holds about a third of the company — on the path for a bumper payday. 

MTN holds a 29% interest in IHS Towers. By June 2021, the company estimated the value of that investment at R30.5bn.  Selling down this stake together with the repatriation of funds from Nigeria would likely wipe out MTN’s current debt. 

The last time MTN had an investment grade rating was five years ago, in 2016. By reducing debt, MTN said it “has greater financial flexibility to take advantage of the attractive growth opportunities” that it had identified.

In a statement, MTN’s group CFO Tsholofelo Molefe, said: “We are very encouraged that our work to reduce debt has been recognised, with a move up to investment grade. Today’s announcement is another important indicator that we are on track with the delivery of our strategy.” 

gavazam@businesslive.co.za

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