How MTN Cameroon Borrowed $152 Million to Stay Afloat in the First Half of 2023

MTN Cameroon, a mobile phone company, faced challenges with its financial records and sought external help. It secured a loan of roughly $151.9 million (equivalent to about 91.5 billion FCFA) from undisclosed banks to ensure its operations from January to June 2023. This significant amount represented nearly 98% of the company’s operating expenses during that period.

Interestingly, MTN Cameroon refrained from borrowing in 2022. It managed to repay around $29.9 million (18 billion FCFA) of its debt that year. Moreover, the company began January 1, 2023, with a net positive cash balance of about $48.3 million (29.15 billion FCFA). However, by the end of June, its cash position had shifted to a negative one, with a debt of approximately $21.6 million (13 billion FCFA).

Ralph Mupita, the MTN Group President and Chief Executive
Ralph Mupita, the MTN Group President and Chief Executive

A plausible explanation for this situation stems from the freezing of the company’s funds due to a legal dispute. For over two years, the properties of a prominent Cameroonian billionaire named Baba Danpulloin were seized and sold by his bank in South Africa. The First National Bank (FNB) explains that its client has been unable to repay his debts since 2019. This is refuted by Baba Danpullo, who speaks of “expropriation” and a “racist crusade” against his group, Bestinver. In response, he obtained a Cameroonian judge’s order to freeze the bank accounts of MTN, Broadband Telecom by Collins Mukete, Mobile Money Corporation, and Chococam, in order to recover what he sees as “maliciously diverted sums” by his banker. On the other hand, MTN accuses Baba Danpullo of “attempted extortion of funds.” An investigation into this battle where justice is the first victim.

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Consequently, MTN, the mobile company, had to rely on borrowed funds to sustain its operations during the period of frozen assets.

MTN Cameroon’s impressive business performance continued, generating approximately $258.5 million (156 billion FCFA) in revenue in the first half of 2023. With a healthy operating margin of 36% and a dominant market share of 51.4%, the company continued to gain credibility with Cameroonian banks. Nonetheless, uncertainties arose.

Financial data for the first half of 2023 revealed that its interest-bearing liabilities exceeded its available liquidity. Furthermore, a portion of its cash was seized by legal authorities, rendering it unusable for daily operations. Additionally, the parent company based in South Africa might face challenges in readily intervening. Furthermore, MTN Cameroon’s debt level increased to 1.5 times its equity.

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Should the Cameroonian legal system fail to promptly resolve the underlying issue, MTN Cameroon could potentially face a short-term liquidity shortfall. The trajectory of the telecommunications sector would also impact the company. Any slowdown in the sector’s activity could worsen the company’s difficulties in meeting its financial obligations. This situation would naturally raise concerns among creditors and providers of goods and services, as they might experience delays in receiving their payments amid an unfavorable economic backdrop.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. 
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard