Telecoms showcase - commercial financing

Benchmark transactions - working with commercial financing

In times of greater uncertainty, commercial Banks increasingly look to the EBRD to support loan syndication and equity placement transactions. The Bank seeks to mobilise both commercial and official sources of co-financing, whenever possible.

Benchmark transactions include Kazakhtelecom in Kazakhstan, Mobitel GSM in Slovenia and VIPnet GSM in Croatia.

Extending the phone network in Kazakhstan

Communities and businesses in Kazakhstan need a reliable phone network to provide an effective means of communication across this vast country. The national telecoms operator, Kazakhtelecom, is pursuing a network expansion and modernisation programme that aims to achieve this by providing advanced fibre optic connections across the country.

The EBRD has worked closely with Kazakhtelecom since 1999, helping to promote significant improvements in efficiency, management performance, corporate governance and financial results. In 2003 the EBRD stepped up our support for the company by extending a €87 million syndicated loan.

The seven-year loan, a record for the Kazakh telecommunications sector, was co-arranged by Standard Bank London and syndicated to a number of international banks. It will provide additional resources for investment in the development of Kazakhstan’s network and services.

“We are delighted with the confidence shown by the EBRD in our company through this record-breaking transaction and look forward to working with the Bank on future projects,” said Kanat Nurov, Vice President and Chief Financial Officer of Kazakhtelecom.

The EBRD will continue to support the telecommunications sector in Kazakhstan as it faces the challenges of market liberalisation and increased competition. Previous EBRD support has included assistance to the Kazakh Government in implementing a transparent regulatory framework for the sector. The governments of Japan and Taipei China each contributed €200,000 in donor funding for this programme while the European Community provided €364,000.

VIPnet GSM, Croatia

In 1999, the EBRD jointly arranged with Creditanstalt AG a €120 million loan package to VIPnet GSM for the construction and operation of the second national GSM 900 mobile network in Croatia.

Consisting of a €77.6 million 8-year syndicated loan with two 9-year parallel loans of €22.4 million from the EBRD and € 20 million from the Nordic Investment Bank respectively, the project was the EBRD's first major private sector investment in the Croatian telecommunications sector.

The loan was guaranteed by the Austrian Export Credit Agency and the Swedish Export Credits Guarantee Board.

In 2001, the Bank provided an additional €10 million as part of a €50 million loan facility to finance further expansion of the network.

The project forms part of the EBRD's strategy for economic recovery in south-eastern Europe and will promote much-needed competition in the Croatian telecommunications sector.

Mobitel GSM, Slovenia

Mobitel d.d. is the largest GSM service provider in Slovenia with more than 1.2 million subscribers as of December 2001. The company is a wholly-owned subsidiary of Telekom Slovenije, the incumbent fixed-line Slovenian operator.

Sumitomo Mitsui Banking Corporation and WestLB were mandated to raise up to €225 million in debt with 5 and 7-year maturities. Part of this loan, about €122 million, was provided by the European Investment Bank on a 5-year basis and guaranteed by commercial banks. The remainder, €103 million, was provided by commercial banks (short maturity and 5-years) and a 7-year tranche from the EBRD (€25 million) and SMBC (€6.2 million).

The funds will be used to extend maturities of the existing borrowings as well as fund its GSM network.

The transaction, the largest syndicated deal in Slovenia, has an important demonstration effect in the syndicated loan market. It proves that, despite strong negative sentiment among lending banks, large long-term financing can be made available in a country that is in an advanced stage of transition.

In addition, the Slovenian Government has made major progress in sector reform during the last year, developing a new telecommunications law and establishing a new telecommunications regulator.

The EBRD's participation in the transaction provides a firm basis for further policy dialogue and co-operation with Slovenian operators.