The freezing of its bank accounts, due to the legal dispute initiated by the Cameroonian billionaire Baba Danpullo, has impacted MTN Cameroon’s cash flow. The latter borrowed 91.5 billion FCFA in the first half of 2023, representing 98% of its operating expenses.
According to data collected by “Investing in Cameroon”, MTN Cameroon borrowed 91.5 billion FCFA ($158 million) during the first half of 2023. These funds were mobilized in the form of syndicated loans from the banking sector. This amount is equivalent to nearly 98% of the company’s operating expenses for this period.
However, the company closed the year 2022 without taking out new loans. Quite the contrary, it had ended that year by reimbursing nearly 18 billion FCFA of debt. In addition, it had a positive net cash of 29.15 billion FCFA as of January 1, 2023. However, at the end of last June, its cash showed a net debt of 13 billion FCFA.
One of the plausible hypotheses to explain this situation is the impact on the company’s cash flow of the freezing of its accounts. This situation is the consequence of the legal action initiated by the Cameroonian billionaire Baba Danpullo, in reaction to what he considers to be “illegitimate expropriation” of his property in South Africa by the local judicial authorities.
Banking institutions have therefore chosen to support MTN Cameroon. Its solid performance, with a turnover of 156 billion FCFA in the 1 st half of 2023, an operating margin of 36% and a dominant market share of 51.4%, reinforce its credibility with Cameroonian banks. MTN leaders are also playing the insurance card.
However, this trust could be undermined. Financial data for the first half of 2023 shows that its liabilities with interest (95.8 billion FCFA) exceed its cash (83 billion FCFA). In addition, part of this cash has been seized by the courts, making its use for daily operations impossible. Also, it is not certain that the holding company of the group based in South Africa, intervenes easily in case of challenges. It must also manage a debt that has increased to reach 1.5 times its equity.
If the Cameroonian courts do not decide quickly on the merits of the case, MTN Cameroon could find itself in a situation of short-term liquidity deficit. Developments in the telecommunications sector will also be decisive for the operator. A slowdown in activity could accentuate its difficulties in honoring its financial commitments.
Creditors, providers of services and goods, should also be concerned. In an unfavorable economic context, they could wait longer to be paid.
The reason why Cameroonian justice froze the accounts of MTN Cameroon and Chococam remains doubtful. This decision has been shown to be based on inconsistent claims. The Cameroonian billionaire argued that these two Cameroonian companies have a common shareholder, the Public Investment Corporation, a South African investment entity which is also the main shareholder of First National Bank, the banking establishment which seized the assets. of Baba Danpullo due to unpaid debts.