Moody’s to Downgrade MTN’s Ratings as Nigeria Orders the Telco to Pay New $2b Tax

Following the negative news around its Nigerian subsidiary, South African telco group, MTN, is under review by Moody’s for a possible credit downgrade.

The financial services and rating company, Moody’s, announced the decision following news that MTN Nigeria has been slammed a new $2 billion tax bill by the Nigerian Attorney General.

This is turning into a full-blown crisis for #MTN.
Nigeria now says the company owes $2 billion in back taxes — that's on top of the $8.1 billion it's been told to return in illegally repatriated funds. Stock is at a 10-year low.

— John Bowker (@JohnHBowker) September 4, 2018

“MTN’s ratings have been placed on review for downgrade to reflect the uncertainty around the potential implications of the recent CBN and NAG announcements on MTN’s credit profile,” Moody’s said.

According to reports circulating this week, this tax bill is not new but had accumulated over the decade. However, the timing of this decision comes just a few days after the CBN asked the company to refund $8.1 billion it illegally repatriated to South Africa.

End of road for MTN in Nigeria? My thoughts and prayers are with the endangered staff at this difficult time… https://t.co/b5sqQ9cJgU

— Dele Momodu Ovation (@DeleMomodu) September 4, 2018

Now, these issues have cast the company’s operations in a negative light. A few years ago, the telco had to also negotiate its way out of a fine for failing to deactivate unregistered sims. For this, the NCC slammed it with a N1 trillion fine. But following negotiations, the company was asked to pay around N330 billion, and also list on the Nigerian Stock Exchange.

Although MTN still has plans to list, its finances have been severed disrupted by the negative news once again. It could also affect the companies activities in its most lucrative market.

MTN Eyes to List $5.2bn IPO on NSE in July, What you Need to Know! https://t.co/bMSNSdqyiw via @technextdotng

— FAMOUS EHICHIOYA (@Cyberbird20) March 5, 2018

According to Moody’s, MTN Group has a debt of around $3.7 billion and should be able to pay back debt maturities within 12 to 18 months. However, the recent tax bill and the CBN order now puts plenty of uncertainty around its finances.

For instance, the company’s shares on the Johannesburg Stock Exchange crashed to a 9-year low following news of the CBN order. Again, in Ghana, MTN’s recent IPO on the Ghanaian Stock Exchange is reputed to be the largest in the country. However, the $237 million raised was way below the $745 million projected.