5 September 2022, MTN Group announced that it has settled $300-million in Eurobonds that were due in 2024. MTN did this to reduce non-rand debt and achieve a lower ratio of non-rand to rand denominated debt which now stands at 35:65 from 42:58. 

In 2019, MTN Group started an “Asset Realization Programme” in order to raise ~R25bn by 2025 which will be used to pay down its net debt pile that stood at R55.3bn at the time. MTN Group is blessed with “quality” non-core assets which it can sell and raise serious cash.

MTN Holdco’s net debt as at 30 June 2022 was R28.4bn which is an improvement from R30.1bn as at 30 June 2021 and a big decrease from R43.3bn as at 30 June 2020 and R55.3bn as at 30 June 2019. This is a big improvement.

At 30 June 2022, MTN Holdco’s net debt-to-EBITDA ratio was 0.4x, which is comfortably within covenant limits of 2.5x. This rato gives an indication as to how long a company would need to operate at its current level to pay off all its debt.

This was boosted by upstreamed dividends and management fees amounting to R9.4 billion in H1 FY22, including R4.5bn from Nigeria. The repatriatation of money from Nigeria has always proven to be a difficult task. In 2020, MTN managed to repatriate dividends of ~R4,7billion from MTN Nigeria after struggling with getting it due to challenges of securing foreign currency.

In 2018/2019, MTN was ordered to return $8.13bn after being accused of illegally repatriating it to South Africa by the Nigerian Central Bank. MTN agreed to pay a $53m fine without admitting guilt.

MTN Holdco’s interest cover improved to 5.9x as at 30 June 2022, from 6.3x as at 30 June 2021 which is well within the covenant limit of no less than 5,0x. Interest cover ratio is used to determine how well a company can pay the interest on its outstanding debts (riskiness of lending capital). 

Holdco’s net debt to core profit ratio, was at 2.2x which was above its stated target of 1.5x. What is the purpose of the net debt to core profit ratio? The ratio is used by lenders to work out how well a company’s earnings can cover its debt.

MTN Holdco cash balances stood at R21.3bn with gross debt at R49.8bn, giving net debt of R28.4bn. The liquidity headroom is R55.9bn.

MTN Group’s medium-term focus is to deleverage faster and to improve the funding mix at the Group level through reducing exposure to US dollar debt with a medium-term target of non-rand to rand-denominated debt at Group level of 40:60. Post the Q3 of FY21, there was an early redemption of the $500m principal amount of 5.373% Guaranteed Notes due in February 2022.

05 September 2022, MTN Group settled $300-million in Eurobonds that were due in 2024. MTN did this to reduce non-rand debt and achieve a lower ratio of non-rand to rand denominated debt which now stands at 35:65 from 42:58.

In October 2021, Standard&Poor revised and upgraded MTN Group’s stand-alone credit based on the progress MTN Group has made in deleveraging the balance sheet and expectation that MTN Group will not revert to higher leverage levels. Some key factors underpinning S&P’s rating rationale:

  • MTN’s debt has been decreasing sustainably by using proceeds from the asset realization program and solid operating cash flow which was not materially affected by COVID-19,
  • S&P expects robust top-line growth in the forecast period, and
  • MTN’s business risk profile reflects company’s solid competitive position and diversified operations, which mitigate against high country risk and regulatory exposure.

What has MTN sold since the start of the “Asset Realization Programme“?

MTN has raised R15.8bn since March 2020 against a 2025 target of R25bn through:

  • MTN South Africa entered into a sale and leaseback transaction with IHS Towers for 5 709 of MTN SA’s towers, comprising; 4 000 greenfield and 1 700 rooftop sites. The offer value amounted to R5.1 billion. MTN has 13 000 South African telecommunications towers. Bloomberg Intelligence had estimated that MTN could raise up to R11bn from concluding a sale and leaseback transaction for its 13 000 South African telecommunications towers. 
  • In Oct 2021, IHS Towers listed at $21/share on the New York Stock Exchange. MTN Group’s shareholding post the IPO and primary capital raise is now 25.8%. As at 30 Jun 2022, MTN’s shareholding in IHS was valued at R14.5bn.
  • MTN Group sold 20% in MTN Uganda to the public for R2.3bn. MTN owns 96% of
  • MTN Group sold a further 23,7% of its investment in MTN Ghana and pocketing proceeds of R519m.
  • MTN Group intends on exiting the Middle East market and is currently negotiating to sell its 75% in its Syrian unit for R982 million to TeleInvest, which owns the other 25% stake in the Syrian unit. The Syrian business was placed under judicial guardianship. Why was MTN’s Syrian unit placed under judicial guardianship? The Syrian Telecommunications and Post Regulatory Authority has accused MTN of mismanagement and violation of its operating licence conditions.
  • Sale of ATC Ghana and ATC Uganda tower JV for R8,8bn, 
  • sold 18,9% investment in Jumia for R2,3bn. 
  • localisation of an 8% shareholding in MTN Zambia for R178m. 
  • sold, and fully exit, its 20% shareholding in Belgacom International Carrier Services SA (BICS) to Proximus NV/SA for R1,8bn.

MTN also has other asset disposals in the pipeline termed “future focus” and has a current fair value R50bn. The proceeds from the sales of stakes will be used to reduce the debt pile.

It was reported that MTN Group has hired JPMorgan Chase & Co to assist it on the planned separation of its fintech unit. Nedbank estimated the fintech arm could be valued at $6bn (R88bn).

MTN Group has been working that fintech unit well. MTN has seen a 30.9% increase in fintech revenue to R15.9bn with an EBITDA of R7.43bn which is a 31.5% increase YoY. MTN intends to accelerate the fintech platform growth with a goal for it to contribute more than 20% of the service revenue. For the six-month period ended 30 June 2022, Fintech contributed 9% to MTN Group total service revenue.

Why is MTN agressive in its attempts to reduce non-Rand/foreign denominated debt?

Foregin denominated debt exposes a company whose earnings are largely in Rands to currency risk.

For the six-month period ended 30 June 2022, MTN experienced forex losses of R2.4bn due to weaker closing rand exchange rate against dollar. This has a negative impact on net debt and leverage.

The global telecommunications (telecom) industry is capital intensive.

According to a PwC survey telecoms operators indicated that they could be wasting up to 20% or $65 billion a year in capex.

Are there any positives of operating in the telecoms space? Here are a few:

  • Highly regulated, concentrated markets with generally predictable cash-flows and limited churn
  • Generally high EBITDA margins (30-40%)
  • A young population like Africa gives you a solid customer base
  • Resilience to periods of downturns in advanced economies

There are also some negatives such as;

  • Highly capital intensive business (capex in the range of 10-20% of revenue). Vodacom’s capex rose in the year ended 31 March 2022 stood at R11.15 billion while its revenue totalled R80.8 billion. MTN had a capex guidance for FY 22 of ~R35bn with revenues of R181.65bn
  • High leverage (net debt/EBITDA ).

MTN faced so many challenges outside of South Africa such as:

  • One of the biggest challenges MTN faced was in 2015. In 2015, Nigerian Communications Commissions fined MTN $5.2bn for failing to disconnect more than 5 million subscribers with unregistered SIM cards. The fine was based on a calculation of $1000 per SIM card. The fine was 20% larger than MTN Nigeria’s annual revenue and 5x the amount of cash MTN had on hand. MTN hired former US attorney-general Eric Holder be its “negotiator” during talks with Nigerian regulators. The fine was reduced to $1.5 billion and MTN had to list its shares in MTN Nigeria which it by way of an introductory listing.
  • 2019, in the lawsuit brought before the US District of Columbia, MTN was accused of paying protection money to the Taliban while building and operating its Afghan mobile telephone network.
  • MTN was ordered to return $8.13bn after being accused of illegally repatriating it to South Africa by the Nigerian Central Bank. MTN agreed to pay a $53m fine without admitting guilt.
  • MTN Syria was placed under judicial guardianship after the Syrian Telecommunications and Post Regulatory Authority accused MTN of mismanagement and violation of its operating licence conditions.

After all the troubles MTN faced, MTN decided in 2019 to establish an “international advisory board” (IAB) chaired by the former president of South Africa, Thabo Mbeki.

The board members are:

  • John Kufuor
  • Dr. Aisha Abdullahi
  • Dr. Mohammed el Baradei 
  • Dr. Momar Nguer

Sep 2021, Phuthuma Nhleko resigned from the IAB following his appointment to the board of one of MTN’s key suppliers. This was to avoid any perception and/or potential conflict of interest.

The annual fees for each member of the IAB is $100 000 and $150 000 for the chairman.

The IAB shares its perspectives on geopolitical matters which impact on the continued development of the regions in which we operate. It also assists MTN in its work to be a responsible and exemplary corporate citizen. The mandate of the IAB does not include operational matters.

In 2021, IAB met once on. Among the key matters on which it deliberated were:

  • Middle East relations,
  • Domestic security issues,
  • Policy reforms,
  • Geopolitical risks,
  • Emerging regulatory challenges,
  • Localisation, and
  • Pan-African positioning and identity.

MTN has an “International advisory board” to assist it navigate tough territories.

MTN Group is benefiting from the war and rising oil prices. MTN Group’s shares went past the magical R200 mark recently. MTN also resumed dividend payments.


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