CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The telecommunication sector has a vital and tremendous role in the financial prudence of both advanced nations and developing nations especially in the case of Cameroon. As in many countries, the government officials of the country in general and the telecommunication industry in particular are striving hard to provide these vital services especially to remote areas as a means to eradicate poverty and increase economic growth (Palladan, 2017; Tchamyou, Erreygers & Cassimon, 2019; Asongu & Odhiambo, 2020). The success achieved from telecommunication has increased in Cameroon due to the regulation of the telecommunications sector in order to achieve multiplier effects on the nation‟s economy, leading to the expansion of other areas like education (Olutosin, 2015). Bhavnani, Chiu, Janakiram, Silarszky and Bhatia (2008)., state that, gaining access to vital information is the key to the emergence of knowledge that plays a tremendous part in promoting skills, empowering poor communities and linking many institutions involved in economic development. Hence the communication industry can play a vital role in enabling these connections and addressing other developmental challenges if managed properly (Tchamyou, 2017; Asongu, 2017a, 2017b).

The telecommunication companies in Cameroon include: MTN Cameroon, Orange Cameroon,

Camtel, Nexttel Cameroon (Viettel), Cameroon Mobile Telecommunications (CMT), CamNet, MTN Network Solutions, Matrix Telecoms, Ringo, Pastel, YooMee. Some of these companies have ceased operations due to the stiff competition from their peers.

MTN is the most used telecommunication company in the country as compared to Orange, with the highest number of subscribers and net profit. As from 2019, Orange’s net profit was approximately 28.94 billion CFA Franc. The company had 7.9 million subscribers with a market share of 33.2 % while MTN had 9 million subscribers, representing 47.20% of the market share and a corresponding turnover of about 212 billion Franc CFA as of the time of data collection. (Khan, 2019). Presently, about 95% of all electronic money transactions are carried out through the mobile-money services operated by MTN-Cameroon and Orange-Cameroon. Orange is one of the principal providers of global information technology (IT) and communication facilities to international corporations under the brand “Orange services” (Lancaster 2020). Since the establishment of MTN, Cameroon has devoted her efforts heavily in the construction of 2G, 3G, 4G and 4.5G telecommunications networks which are now the most concrete and generally spread within the country, if not in the entire Central African sub-region.

The possibility of this network enables MTN to provide services to virtually 97% of Cameroon’s population and to be present in more than 7,400 towns and villages in the country. This network has been frequently seen as the best and wildest in the country by world class agencies (Ookla, Rohde and Schwarz, 2019). MTN Cameroon was able to recruit approximately 800,000 new subscribers and recorded a close to 2% increase in turnover over the same period, being its best quarterly performance in the last four years ( MTN official website, posted nov. 2019). Orange telecom has 135.619 employees across the globe. Orange telecom provides services such as mobile offers, internet, Orange fiber and deivices (Orange official website).

MTN is the most used telecommunication provider in the country as seen from the above statistics. MTN provides services such as; MTN cloud backups, cloud video conferencing webEX, MTN cloud security, fast internet services devices, good customer service, many options to choose from, low calling rates, better communication networks as compared to other telecom companies

The concept of corporate social responsibility has become a common practice among financial institutions in Cameroon such as MTN. It is one of the newest management strategies where companies try to create a positive impact on society while doing their business. Companies today are realizing the relevance of moral practices in their businesses, taking into consideration the effects of their operations on people, environment, and society. As such, a multitude of firms has implemented CSR at the forefront of their business strategies. 

Corporate Social Responsibility (CSR) is the inclusion of social, economic and environmental interests of all the stakeholders in the corporate decision-making of a firm. The role of CSR is to produce an overall positive impact on the stakeholders, and it is very important for firms‟ survival. CSR is a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. The motivation to engage in CSR may include improvement in corporate financial performance, customers loyalty and environmental development, pressures from consumers and civil society and corporate objectives. Since CSR is a voluntary engagement in most cases, each company decides individually on the scope of its CSR activities. Indigenous firms perceive and practice CSR as corporate philanthropy aimed at addressing socio-economic development challenges in Cameroon.

CSR has the potential to make positive contributions to the development of society and businesses. CSR is synonymous today with the triple bottom line. The triple bottom line reflects an integrated understanding of business performance in which social, environmental, and economic bottom lines are interdependent. The aim of a triple bottom line approach is to ensure business performance that is socially responsible, environmentally sound, and economically viable. Performance in broader sense refers to the degree to which financial objectives can be accomplished and is an important aspect of financial risk management. It is a process of measuring the results of a firm’s policies and operations in monetary terms. It is used to measure firm’s overall financial health over a given period of time and can also be used to compare similar firms across the same industry or to compare industries or sectors in aggregation (Eshna, 2012). Performance is represented by firm‟s profitability in this study; profitability in accounting is measured in many ways such as gross operating profit, net profit margin, and return on assets, return on equity, return on sales, and return on capital employed among others. It just makes good sense that the companies must be concerned with their financial performance clearly, without profits, the company would simply cease to exist.

Today, most corporate managers believe that business operations should go beyond the simple prospect of money making. Thus, managers should try as much as possible to incorporate the interest of the employee, business partners, customers, shareholders and the society at large into their decision making which offers the best guarantee for consistent profitability. For telecommunication companies to succeed financially, they must have to produce goods that could Enable them generate sufficient profits. Profits making is a function of so many factors, some of which are internal and others external. Amongst the exogenous factors are operational interruption caused by hosting community of the telecommunication companies. This is due to the concern of the community over negative and potential negative effects that businesses bring to the community. The effect ranges from environmental degradations to societal conflicts as a result of the businesses activities. In an effort to overcome the existing conflicts between telecommunication companies and the hosting environments the idea of CSR was advocated which can be considered as a welcome development and avenue for conflicts resolution that exists, but the avenue creates more concern over the implementation and the quantification of the benefits to both the community and the telecommunication companies.

1.2 Statement of the Problem

Global pressure from NGOs pushes companies to adopt CSR policies and McGuire (1963) highlighted the societal obligations for companies (obligations that go beyond the economic and legal framework) that must act fairly as every citizen should, stressing here the ethical dimension of social responsibility. In developing countries, CSR goals often leads to ceremonial commitment, whereas in developed countries the commitments are often substantial (Jamali and Neville 2011, 615). According to earlier studies (Oginni and Omojowo 2016) there is an awareness of CSR in Cameroonian companies, but many formal CSR practices appear to be just for appearance or “ceremonial commitment” performed completely on ad hoc basis (Lim & Tsutsui 2012, 70). 

Given the stiff competition in the telecommunication industry of Cameroon, especially between MTN Cameroon and ORANGE Cameroon and recently joined by CAMTEL under the umbrella of Blue network, the companies imitate what their peers do. MTN and ORANGE have been actively involved in CSR which is easily visible through their sponsorship or donations to sporting activities, health care etc. While these donations increase their expenses, others argue that it is responsible for their performance and growth compared to other companies that have ceased to operate such as Pastel, Ringo, YooMee just to name a few. Therefore the study will seek to determine if CSR has any effect on the financial performance of telecommunication companies in Cameroon.

1.3 Objectives of the Study

The main objective of the study is to examine the effect of corporate social responsibility on the financial performance of telecommunication companies in Cameroon.

The specific research objectives include:

1. To examine the effect of social cost on the return on assets of telecommunication companies in

Cameroon.

1. To examine the effect of social cost on the return on equity of telecommunication companies in Cameroon.

• To examine the effect of social cost on the earnings per share of telecommunication companies in Cameroon.

1. To examine the effect of social cost on the net profit margin of telecommunication companies in Cameroon.

1.4 Research Questions

The main research question of the study is „What is the effect of corporate social responsibility on the financial performance of telecommunication companies in Cameroon?‟ The specific research questions include:

1. What is the effect of social cost on the return on assets of telecommunication companies in Cameroon?
2. What is the effect of social cost on the return on equity of telecommunication companies in Cameroon?

• What is the effect of social cost on the earnings per share of telecommunication companies in Cameroon?

1. What is the effect of social cost on the net profit margin of telecommunication companies in Cameroon?