Announcements Corporate Rating Alerts

GCR Accords an Indicative Rating to MTN Nigeria Communications Plc’s Series 1 Bonds.

Lagos Nigeria, 4 December 2020 — Global Credit Ratings has accorded an indicative public long-term credit rating of ‘AA(NG)(IR)’ to MTN Nigeria Communications Plc’s proposed N100bn Series 1 Senior Unsecured Fixed Rate Bonds, with the Outlook accorded as Stable. The indicative bond rating expires in May 2021.

RATING RATIONALE

Global Credit Ratings (“GCR”) has accorded the above credit rating to MTN Nigeria Communications Plc’s (“the Issuer”, “the Company” or “MTN Nigeria”) proposed Series 1 Bonds based on the following key criteria:

The Issuer is a leading provider of cellular telecommunications services in Nigeria, accounting for approximately 40% of GSM subscriber base in Nigeria. MTN Nigeria is a subsidiary of MTN International (Mauritius) Limited, with the ultimate parent company being South Africa based MTN Group Limited. GCR affirmed the Issuer’s long term rating at ‘AA(NG)’ with a Stable outlook in July 2020. The rating reflects MTN Nigeria’s strong market position, broad spectrum of licences and technical support provided by its parent company.

MTN Nigeria is in the process of registering a N200bn Bond Issuance Programme (“the Programme”) with the Securities and Exchange Commission, backed by a resolution of its Board of Directors. An initial N100bn is expected to be raised in a Series 1 Bond Issuance under the Programme. The bond proceeds will be utilised to optimise MTN’s Nigeria’s existing funding mix and finance network expansion. The Series 1 Bonds shall have a tenor of seven years with maturity in 2027. The Bonds shall constitute direct, unconditional, senior, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves.

The Programme Trust Deed does not offer Bondholders any security over assets, but it does feature a negative pledge and covenants to protect the interest of Bondholders.

As the Series 1 Bonds will represent direct, unconditional, senior, unsecured and unsubordinated obligations of the Issuer, the Bonds will bear the same rating as the Issuer, and any change in the rating assigned to the Issuer will directly affect the Bond rating.

In GCR’s view, MTN Nigeria has sound earnings and cash generative capabilities, which are supported by its strong competitive position. While further Naira devaluation is set to increase operating and funding cost pressures, MTN Nigeria’s margins are expected to remain relatively defensive over the rating horizon.

The Company continues to report sound cash flows, which have covered operational and capital requirements in most years. EBITDA cover of interest is projected in the intermediate range of 5.0x-7.0x range, which is comfortable but does not give material headroom to leverage operations much further. In GCR’s view, the high dividend pay-out ratio will have to be proactively reviewed to improve funding flexibility.

The Issuer’s net debt to EBITDA remains very conservative, at 1.3x (0.4x, excluding operating leases). While this could rise due to the planned issuance of Series 1 Bonds, the Company’s funding philosophy is expected to be relatively prudent going forward.

The indicative bond rating will be converted to a final rating upon receipt of the executed transaction documents.

NATIONAL SCALE RATINGS HISTORY

Initial rating

Issuer (June 2019)

Long term: AA(NG)

Short term: A1+(NG)

Rating outlook: Stable

Issue (November 2020)

Series 1 Senior Unsecured Bonds: AA(NG)(IR)

Rating outlook: Stable

Last rating

Issuer (July 2020)

Long term: AA(NG)

Short term: A1+(NG)

Rating outlook: Stable

Issue (November 2020)

Series 1 Senior Unsecured Bonds: AA(NG)(IR)

Rating outlook: Stable

ANALYTICAL CONTACTS

Primary Analyst

Femi Atere

Senior Analyst

femi@gcrratings.com

01-904 9462-3

Lagos.

Committee Chairperson

Dave King

APPLICABLE METHODOLOGIES AND RELATED RESEARCH

Global Master Criteria for Rating Corporate Entities, updated February 2018

MTN Nigeria Communications Plc’s Issuer rating report, 2019-20

Glossary of terms/ratios, February 2018.

RATING LIMITATIONS AND DISCLAIMERS

ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.COM.NG/UNDERSTANDING-RATINGS. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT HTTP://GLOBALRATINGS.COM.NG/RATINGS-INFO/RATINGS-SCALES-DEFINITIONS. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT WWW.GLOBALRATINGS.COM.NG

SALIENT FEATURES OF ACCORDED RATINGS

GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the indicative Bond rating expires in May 2021

MTN Nigeria Communications Plc and the Issuing Houses participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.

The indicative Bond rating has been disclosed to Issuer.

The information received from the Issuer, the lead Issuing House and other reliable third parties to accord the Bond rating included: Draft Shelf Prospectus, Draft Programme Trust Deed, Draft Series 1 Pricing Supplements, as well as Draft Series 1 Trust Deeds.

The rating above was solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the rating.

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ALL GCR CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS, TERMS OF USE OF SUCH RATINGS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS, TERMS OF USE AND DISCLAIMERS BY FOLLOWING THIS LINK:HTTP://GCRRATINGS.COM. IN ADDITION, RATING SCALES AND DEFINITIONS ARE AVAILABLE ON GCR’S PUBLIC WEB SITE AT WWW.GCRRATINGS.COM/RATING_INFORMATION. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. GCR's CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THIS SITE.

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