Uganda: MTN Borrowed Shs368.5b to Fund Licence Extension

Commercial banks in Uganda are expected to profit off the $100m syndicated loan advanced towards MTN Uganda to pay for its 12 year licence.
In notes published along its financial results for the half year ended June, MTN revealed an increase in its net debt from Shs110b (R423m) in December 2019 to Shs367b (R1.6b) due in part to a syndicated loan advanced to the telecom to fund extension of its license.
The $100m loan had, during the reporting period, pushed the telecom’s net debt portfolio by at least a 233.6 per cent.
MTN, in April borrowed $100m (Shs368.5b) from a consortium of commercial banks in Uganda for a period of five years.
The loan, whose interest rate was not revealed, was a combination of dollar and shilling-dominated advances.
Asked why MTN opted to borrow locally, which is usually more expensive, Mr Wim Vanhelleputte, the MTN chief executive officer, said borrowing domestically was the right thing given that Uganda has a mature banking system.
“Yes interest rates are higher, but our revenues are in shillings so it is good practice to keep part of your debt in shillings,” he said.
MTN Group, in its financial results, highlighted that execution of its 2020 refinancing priorities had progressed well, noting the outcome was pleasing given the risks and uncertainties presented by Covid-19 on capital markets.
Dr Fred Muhumuza, a Makerere University lecturer, yesterday said the acquisition of such a hefty loan from the local market, especially during the lockdown speaks highly of the stability of Uganda’s banking system.
“It was good business of course for the banks for lending to such an entity. It is also good that such money can be raised domestically and on such short notice to be able to finance such a big investment,” he said, noting that it is a positive move since money will be retained in the economy through loan payments as opposed to repatriation.
However, Dr Muhumuza observed that it would have also been good for the country if the money was sourced internationally to be an additional injection into the economy.
“You would have expected MTN to mobilise and bring in new money from out. That sends a signal on why they didn’t do that. Could be they were trying to protect other global investments,” he said.
Low demand
Impact on private sector lending
According to Dr Muhumuza, the loan, which could have been pooled from partner banks abroad will not impact private sector lending, amid reduced demand for credit.
Ministry of Finance in May said the value of loans approved in April fell by 67.9 per cent to Shs490.80b from Shs1.529 trillion in March.
“Some of the local private sector were not borrowing because they had closed down the businesses, banks did not have demand,” Dr Muhumuza.

Source: The Monitor

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