GCR Upgrades MTN Nigeria Ratings Outlook to Stable
African-focused rating agency GCR Ratings has affirmed the national scale long-term and short-term issuer ratings of AAA (NG) and A1+(NG), respectively, accorded to MTN Nigeria Communications Plc.
Concurrently, GCR has affirmed the national scale long-term issue rating of AAA (NG) accorded to each of MTN Nigeria Communications Plc’s existing senior unsecured bond issues.
The outlook on the ratings has been revised to stable from negative. GCR said the affirmation of MTN Nigeria Communications Plc’s ratings and change in outlook to stable (from negative) reflects its return to profitability following two years of net losses.
This has been underpinned by the reduced foreign currency exposure and consistent robust cash flow generation.
Rating analysts highlighted that although the company’s capital structure is weak, with very high debt and negative equity, and this is offset by ongoing support from its ultimate parent, MTN Group Limited.
GCR said MTN Nigeria maintains its position as the largest mobile network service provider in Nigeria, with an extensive network infrastructure that supports deep market penetration and a strong subscriber base.
As published by the industry’s regulator, the company reported a significant recovery in active subscribers in March 2025 against the decline reported in 2024 due to the removal of non-verifiable numbers. Accordingly, its market share increased to 55.0% of active subscribers in Nigeria as of March 2025 from 51.4% in Dec 2024 and 38.8% in 2023.
GCR expects these factors to underpin the company’s competitive position over the medium term, particularly with regards to customer acquisition, revenue generation, and cost efficiency.
Nevertheless, competition within the sector has intensified as other local players build capacity and new entrants emerge across various segments. “Our assessment of earnings is anchored on the sustained revenue growth despite the challenging operating environment”.
MTN Nigeria’s revenue increased by 36% to N3.4 trillion, or USD2.3 billion, for the financial year ended December 2024 and by an annualised 26% in the three-month period ending March 2025, underpinned by the rising demand for data and digital services.
The higher income was also supported by the one-off earnings recouped from USSD and interconnected debt, as well as the speedy recovery of barred subscribers, while the upward tariff adjustment partly bolstered the Q1 2025 performance.
Cost pressure persisted through 2024, due to the high USD-denominated operating expenses amid persistent naira devaluation. Consequently, the earnings before interest, tax, depreciation, and amortisation (EBITDA) margin declined further to 39.2% in 2024 from 48.9% in 2023 from 53.5% in 2022.
This, combined with high foreign exchange (FX) losses and elevated finance charges, resulted in a net loss of N400 billion in 2024 versus N137 billion in 2023.
“While we note the gradual rebound in the company’s overall earnings margins indicated by Q1 2025 performance, FX exposures still relate to 40%-45% of the cost base”.
Ratings analysts said sustaining the interim improvement is thus dependent on the continued growth in revenue, in the absence of any substantial adverse exchange movement. GCR has moderated the leverage and capital structure assessment due to MTN Nigeria’s elevated debt position and weak capital structure.
Gross debt (including lease liabilities) rose further to N3.3 trillion in 2024 and Q1 2025, respectively, from N2.2 trillion in 2023, primarily due to a spike in foreign currency (FCY) obligations on account of the devaluation.
This, coupled with the earnings pressure, weakened net debt to EBITDA to 2.2x in 2024 from 1.2x in 2023, operating cash flow (OCF) coverage of debt to 30.1% in 2024 from 53.7% in 2023. GCR noted that the company’s interest coverage fell to 3.3x in 2024 from 5.7x in 2023 given the spike in interest charges, compared to much stronger levels historically.
Ratings analysts noted that high debt led to a financial covenant breach in 2024, although a waiver was obtained to prevent debt acceleration, and MTN Nigeria expects to comply with the covenant in June 2025.
The persistent negative shareholder equity further weakens the company’s capital structure, according to the rating note.
To mitigate the FX exposures, the company successfully renegotiated its USD-denominated tower lease contracts, reducing the FCY component of the total lease liabilities to 54.9% as of Q1 2025 as against 58.0% in 2024 from 72.9% in 2023.
MTN Nigeria has also reduced its USD debt to 28.6% of gross debt (excluding leases) as of 31 March 2025 versus 43% in 2023. “We expect the planned reduction in debt and the anticipated higher earnings to support better leverage metrics, as indicated by the interim improvement”, GCR said.
Rating analysts said the liquidity assessment is neutral to the ratings. This is predicated on large cash holding of N303.7 billion as of 31 March 2025 and projected robust operating cash flows, balanced against scheduled debt repayments of N453.2 billion and capital spending requirements of N218.8 billion over the next nine months.
Liquidity is also supported by N89.6 billion ringfenced for debt servicing and the committed facilities of N90.0 billion. Provided the company returns to profitability and attains positive equity in 2025, GCR analysts expect dividend payments to resume in 2026.
Overall, liquidity coverage of sources versus uses is estimated at 1.5x over the nine-month to 31 December 2025 and 1.3x over the 21-month period to 31 December 2026. “We have factored in group support to the ratings as MTN Nigeria is operationally integral to MTN Group.
“We note the reduced revenue contribution of MTN Nigeria to 23.1% of the parent’s gross revenue in 2024 (2023: 35.0%), below the GCR threshold (of c.35.0%) for materiality.
“However, we consider MTN Nigeria to remain an important member of the group in view of MTN Group’s extensive investment in Nigeria”.
MTN Nigeria has raised a cumulative N315 billion in bonds over the past three years under its two separate N200 billion programmes in series 1, series 2, series 1 tranche A and tranche B bonds issuances.
These bonds constitute direct, unconditional, senior, unsubordinated, and unsecured obligations of MTN Nigeria and at all times rank pari passu and without any preference among themselves.
“We have reviewed the Trustee’s bonds performance report and the transaction account bank statements, both dated 8 April 2025 and note that MTN Nigeria has complied with the transaction terms and conditions in respect of the timing of payments as stipulated in the trust deeds”.
Being senior unsecured debt, the bonds bear the same probability of default as the issuer and would reflect similar recovery prospects to senior unsecured creditors in the event of a default. As such, the long-term rating for the respective bonds is equalised with MTN Nigeria’s long term senior unsecured rating, GCR Ratings stated.
“The revision of the outlook to stable reflects our view that, notwithstanding the concerns regarding the capital structure, MTN Nigeria’s strong earnings and cash flows will provide sufficient capacity to meet all obligations.
“This is further supported by the demonstrated group support, in terms of financial management and technology transfer”, GCR stated. #GCR Upgrades MTN Nigeria Ratings Outlook to Stable Nigeria’s Banking Sector Stable, CBN Reassures Nigerians
