Onome Amuge
African-focused rating agency GCR Ratings has affirmed MTN Nigeria Communications Plc’s national scale long-term and short-term issuer ratings at AAA (NG) and A1+(NG), respectively. Concurrently, GCR has affirmed the national scale long-term issue rating of AAA (NG) for each of MTN Nigeria’s existing senior unsecured bond issues.
GCR stated that this affirmation and outlook change reflect MTN Nigeria’s return to profitability following two consecutive years of net losses, a recovery underpinned by reduced foreign currency exposure and consistently robust cash flow generation.
Rating analysts highlighted that while the company’s capital structure remains weak due to very high debt and negative equity, this is offset by ongoing support from its ultimate parent, MTN Group Limited.
MTN Nigeria maintains its formidable position as the largest mobile network service provider in Nigeria. Its extensive network infrastructure supports deep market penetration and a strong subscriber base.
The company reported a recovery in active subscribers in March 2025, rebounding from a decline in 2024 caused by the removal of non-verifiable numbers. Accordingly, its market share expanded to 55.0 per cent of active subscribers in Nigeria as of March 2025, up from 51.4 per cent in December 2024 and 38.8 per cent in 2023. GCR anticipates these factors will boost MTN Nigeria’s competitive position in the medium term, particularly concerning customer acquisition, revenue generation, and cost efficiency.
Despite an increasingly competitive sector, MTN Nigeria’s revenue rose by 36 per cent to N3.4 trillion for the financial year ended December 2024, and by an annualised 26 per cent in the first quarter of 2025. This growth was driven by rising demand for data and digital services. Higher income also benefited from one-off earnings recouped from USSD and interconnected debt, the swift recovery of barred subscribers, and partly from upward tariff adjustments in Q1 2025.
However, cost pressures persisted throughout 2024, largely due to high USD-denominated operating expenses exacerbated by persistent naira devaluation.
While GCR acknowledges a gradual rebound in the company’s overall earnings margins in Q1 2025, analysts noted that FX exposures still relate to 40 per cent to 45 per cent of the cost base. Sustaining this interim improvement is therefore contingent on continued revenue growth in the absence of significant adverse exchange rate movements.
GCR moderated its leverage and capital structure assessment due to MTN Nigeria’s elevated debt position and weak capital structure. Gross debt, including lease liabilities, rose to N3.3 trillion in 2024 and Q1 2025, up from N2.2 trillion in 2023, primarily due to a spike in foreign currency obligations stemming from devaluation. This, coupled with earnings pressure, weakened net debt to EBITDA to 2.2x in 2024 from 1.2x in 2023, and operating cash flow (OCF) coverage of debt to 30.1% from 53.7%. Interest coverage also fell to 3.3x in 2024 from 5.7x in 2023.
The rating agency noted that high debt led to a financial covenant breach in 2024, though a waiver was obtained to prevent debt acceleration. MTN Nigeria anticipates complying with the covenant by June 2025. The persistent negative shareholder equity further weakens the company’s capital structure.
GCR’s liquidity assessment is neutral to the ratings, predicated on MTN Nigeria’s significant cash holding of N303.7 billion as of March 31, 2025, and projected robust operating cash flows. This is balanced against scheduled debt repayments of N453.2 billion and capital spending requirements of N218.8 billion over the next nine months. Liquidity is further supported by N89.6 billion ringfenced for debt servicing and N90.0 billion in committed facilities. Provided the company returns to profitability and achieves positive equity in 2025, GCR anticipates dividend payments will resume in 2026.
Overall liquidity coverage of sources versus uses is estimated at 1.5x over the nine-month period to December 31, 2025, and 1.3x over the 21-month period to December 31, 2026. GCR has factored in group support, noting that while MTN Nigeria’s revenue contribution to the parent declined to 23.1 per cent in 2024 (from 35.0% in 2023), it remains operationally integral to MTN Group given the latter’s extensive investment in Nigeria.
MTN Nigeria has raised a cumulative N315 billion in bonds over the past three years. These senior unsecured bonds, which rank pari passu, have seen the company comply with all transaction terms and conditions, as confirmed by the Trustee’s bonds performance report dated April 8, 2025.
GCR concluded that the revision of the outlook to stable reflects its view that, despite capital structure concerns, MTN Nigeria’s strong earnings and cash flows will provide sufficient capacity to meet all obligations, further boosted by demonstrated financial management and technology transfer support from MTN Group.
