MTN Group has had its long-term credit rating cut to junk status by S&P Global Ratings, the cellphone network announced on Monday.
The credit ratings agency cut MTN’s rating from BBB-— the lowest investment grade rating — to BB+ following its cut of the sovereign credit rating of MTN’s largest market, Nigeria, to B from B+.
“In our view, Nigeria’s economy has weakened due to a marked contraction in oil production, a restrictive foreign exchange regime, and delayed stimulus. MTN has material exposure to Nigeria and SA (which represent 37% and 25%, respectively, of group revenues as of June 30, 2016),” S&P said in its statement.
S&P said that it took into account the Nigerian Communications Commission’s cutting of the fine it gave MTN for failing to identify its customers to $1.6bn from $5.2bn.
S&P said that MTN’s stand-alone credit profile remained unchanged at BBB.
“This cap is in line with peers and reflects our view of MTN’s exposure to potential legal and regulatory risks. We also consider MTN’s ability to maintain sufficient liquidity in a sovereign default scenario,” S&P said.
The move to lower the credit rating comes a week after lawmakers in Nigeria’s parliament agreed to probe allegations that MTN illegally transferred almost $14bn out of the West African country.