S&P affirms MTN rating on tamer dividend as Nigerian fine looms

Standard & Poor’s has affirmed MTN’s credit rating, saying that although the South African company faced a $3.9 billion fine in Nigeria, its decision to hold back on dividends was positive.

“We view MTN’s decision to lower dividends and maintain sufficient liquidity for its normal obligations, while retaining flexibility to address the pending fine, as positive,” said Standard & Poor’s in a statement, adding that it had affirmed the company’s long-term corporate credit ratings at BBB-.

MTN, which was fined $5.2 billion by Nigerian authorities in October for failing to disconnect more than 5 million subscribers in time, earlier this month gave a downbeat outlook on future dividends as it reported full-year results.

The Nigerian Communications Commission (NCC) in December said it will reduce the fine to $3.9 billion and MTN has since shelved a legal challenge while making a payment of $250 million in “good faith” towards settling the matter. But the parliament of Africa’s most populous nation, which is also MTN’s largest market, last week launched an inquiry into whether the NCC was authorised to slash the fine.

Standard & Poor’s said it kept MTN on a negative outlook as it reflects the uncertainty regarding the final fine amount.

“We also note increased sovereign risk related to Nigeria and South Africa, which contribute, respectively, 35 percent and 27 percent of MTN’s revenue,” Standard & Poor’s said.