By 
KEY RATING DRIVERS
There has been no material change in MTN’s credit profile since the previous rating action on 9 April 2020.
The affirmation reflects the company’s 9M20 performance being broadly in line with our expectations. For 9M20, reported service revenue increased 20.3% year-over-year (YoY) (11.4% in constant currency). In MTN’s two largest markets, Nigeria and South Africa, reported service revenue grew 26.5% and 2.1% respectively. Reported group EBITDA margin increased in 3Q20 to 43.2% from 41.8% in 3Q19, bringing the 9M20 constant-currency EBITDA margin to 43.3%.
The Negative Outlook reflects that of the sovereign rating of South Africa.
DERIVATION SUMMARY
MTN’s operating profile compares well with that of Ooredoo Q.P.S.C. (BBB on a standalone basis), Bharti Airtel Limited (BBB-/Negative) and VEON Ltd. (BBB-/Stable), due to strong geographic diversification and a market-leading position in a majority of MTN’s markets. Its profitability remains high for the sector, reflecting its operating profile strength. These strengths are offset by the lack of stability in some markets and accompanying regulatory risks in these countries. Continuing weaknesses in the macroeconomic and operating environments of MTN’s main operating subsidiaries negatively affect MTN’s rating. FX mismatch between debt and cash flows makes its leverage more sensitive to exchange-rate volatility, and leads Fitch to set tighter leverage rating sensitivities.
KEY ASSUMPTIONS
– Low single-digit organic revenue growth in South Africa in 2020-2023;
– Mid-to-high single-digit organic revenue growth in Nigeria 2020-2023;
– EBITDA margin at 34%-36% in 2020-2023, excluding IFRS 16 impact;
– Capex at 16.5% of revenue in 2020 and gradually reducing through to 2023; and
– Dividend growth of 15% per year for 2020-2023.
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