“MTN’s operating model has changed from a pure-play South African company to now a company that’s spread all across Africa,” Fitch analyst Darshak Juta said in a phone interview today. “If you look at ratings on African countries, most of them are sub-investment grade.” The possibility of default, less strict corporate governance and unpredictable regulatory authorities were all concerns, he said.
MTN expects to have more than 200 million subscribers by the second half of this year and is seeking acquisition targets in Africa, Southeast Asia, India and the Middle East. The company’s capital spending rose 70 percent to 30.1 billion rand ($2.94 billion) as it upgraded networks to handle more data traffic as consumers access the Internet from mobile devices.
The ratings company assigned MTN a long-term foreign currency issuer default rating of ‘BBB’ with a stable outlook, it said in a research note yesterday. The Johannesburg-based phone company has a heightened risk in non-investment grade countries, particularly Nigeria, which accounts for 38 percent of its consolidated earnings before interest, taxes, depreciation and amortization, Fitch said.
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