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It was the famous personal finance guru, Robert Kiyosaki, of the “Rich Dad Poor Dad,” book fame, that coined the “Other People’s Money (OPM)” mantra, advancing that, to turbocharge growth, one need not rely on their own money alone.
He advanced, that with masterful utilisation of “OPM” one didn’t have to wait for their savings to grow, but rather they could leverage funds from external sources to quickly grow.
“By understanding how to make money using other people’s money,” Kiyosaki says, “you can make the leap from employee to business owner or professional investor.”
It is particularly even easier for large organisations such as Airtel Uganda, who have a higher ability to flex their muscle with financiers.
At a net profit of UGX297 billion in 2023 and an accumulated net profit of UGX1.78 trillion in the last 6 years, Airtel can surely afford to finance their operations using their own money, but this would mean shareholders need to wait a little longer to cash in on their investment. But why irritate your shareholders when there are banks ready and willing to give you money?
According to Airtel’s financials for 2023, total market debt (bank overdraft plus term loans) increased by UGX64 billion from UGX629 billion in 2022 to UGX693 billion in 2023.
The telco reported that it had utilised bank overdraft facilities from Citi Bank, Standard Chartered Bank, Absa Bank, UBA Bank and Ecobank respectively to meet its working capital requirements.
“The overdraft sanction limit is USD 35 million from Citi Bank, USD 8 million from Standard Chartered Bank, USD 29 million from Absa Bank, UGX 31.4 billion from UBA Bank and UGX 12.9 billion from Ecobank. The overdraft facilities in Citibank and Standard Chartered Bank are fungible based on the payment requirements” the company reported.
The telco also reported that it had earlier obtained loan facilities of UGX32 billion and USD 40 million during December 2021 from the Absa Group for operational working capital and tax payments.
“The Interest rate on the loan is a margin rate of 3.30% plus 180-day treasury bill rate for the UGX loan and 3.62% margin rate plus 3 months Secured Overnight Financing Rate (SOFR) for the USD loan. The USD40 million facility has been fully paid as of 22nd December 2023. This loan facility will run for 4 years and mature on 25th December 2025 with quarterly repayments,” it added.
On 14 December 2023, Airtel also obtained a loan facility of UGX260 billion from Stanbic Bank for working capital purposes.
“The Interest rate on the loan facility is a margin rate of 2.4% plus a 180-day treasury bill rate. This loan facility will run for 4 years and mature on 14 June 2027 with quarterly repayments of interest. The earlier loan of UGX 150,000 million has been fully paid off.
Airtel also disclosed earlier obtained a loan facility of UGX 75 billion on 11 December 2020 for working capital and payment of license renewal fees from dfcu Bank. The Interest rate on the loan facility was a margin rate of 4.70% plus an 182-day treasury bill rate on the day of drawdown of 9.8%. This loan facility will run for 5 years inclusive of 12 months grace period with a maturity date of 11th November 2025,” the company added.
The company rolled over a Standard Chartered Bank loan facility of UGX 14.9 billion on 5 May 2022 for license renewal fee payment. The Interest rate on the loan facility is a 364-day treasury bill rate Plus 1.85% per annum. This loan facility matured on the 29th of September 2023.
The company also disclosed that it had signed an agreement with its sister company, Airtel Mobile Commerce Uganda Limited (AMCUL) on 30 Jun 2023 for a facility of UGX 75 billion to be drawn in instalments. The telco went ahead to withdraw UGX 20 billion on 1st September 2023 and UGX 20 billion on 6th October 2023, respectively totalling UGX 40 billion with a tenor of One year. The Interest rate on the loan facility is a 90-day treasury bill rate plus 2.5% per annum.
The company said that even though the cost of finance, net of finance income had increased to UGX 165 billion compared to UGX 142 billion in the prior year, the “debt levels remain sustainable both in the short and medium term”.