Translated version of this PSD: Georgian
Up to US$ 100 million senior A/B Loan to MagtiCom, a leading telecoms operator in Georgia. The use of proceeds is to finance acquisition of retail assets of the second biggest Internet Service Provider in Georgia, Caucasus Online ("CO"). The assets include all the infrastructure, equipment and network necessary to provide internet, telephony and IPTV services to end customers.
A joint statement of both parties was published on May 30, 2016.
MagtiCom intends to acquire the retail assets of CO, covering broadband internet services to retail and corporate customers. MagtiCom, renowned for its innovation and drive for technological development, sees the acquisition of retail assets of CO as a continuation of its drive by developing the Internet Service Provider (ISP) business through the expansion of the geographic coverage of internet and Internet Protocol television (IPTV) services to the regions in Georgia. MagtiCom has already notified the regulator of the acquisition plans and received permission to proceed.
The project may have a positive transition impact through supporting competition in the broadband internet market and expansion through improving broadband penetration in the regions of Georgia.
This is important in the context of the relatively low national fixed broadband penetration of about 11 per cent.
MagtiCom is a leading telecoms operator in Georgia providing a range of services from mobile, fixed wireless, broadband to Direct-To-Home ("DTH") satellite pay TV services. As of December 2015, the Company had 1.9 million mobile subscribers and 39 per cent subscriber market share in the mobile segment. Since its inception in 1996, MagtiCom has played a major role in development of networks such as GPRS in 2001, 3G network in 2006, satellite broadcasting in 2012, and 4G/LTE network in 2015. MagtiCom also offers fixed wireless services using its CDMA network. In January 2012, the Company launched first DTH services in the country.
EBRD Finance Summary
US$ 100 million senior EBRD A/B Loan to MagtiCom consisting of an A loan of US$ 75 million for EBRD's own account and a B loan of 25 million syndicated to international lenders.
Environmental and Social Summary
The project was categorised B under the 2014 Environmental and Social Policy. The project is unlikely to be associated with any significant environmental or social impacts and due diligence was therefore based on a desk review by ESD of information provided by the Company via the completed environmental and social due diligence questionnaire, a selection of Company documentation of internal procedures, and a follow-on discussion with the Company's management team.
Despite the low environmental, health and safety, social and labour (EHSSL) risks associated with the transaction itself, the project will result in a substantial expansion of the client activities, including a 50% staff increase, such that due diligence aimed to confirm that policies and supporting management systems and plans are appropriate for this significant expansion of operations. This was done by assessing existing corporate environmental and social management systems, implementation capacity and performance of MagtiCom, in addition to evaluating any potential environmental, health, safety, and social (EHSS) risks associated directly with the acquisition of the new assets.
Due diligence did not raised any particular environmental and social concerns associated with the new assets, and MagtiCom has some processes and staff in place to manage environmental and social issues. However, there is scope for addressing some gaps in the capacity, resources and processes available to more systematically manage EHSS and labour risks in the context of the Company's expansion. Human resources management capacity needs to be increased and EHSS management integrated to ensure proper implementation of a currently disparate set of measures in place to manage some aspects of the Company's energy consumption, electric and electronic wastes, community grievances mainly related to the potential effects of electromagnetic fields, and occupational health and safety, including road safety. There currently is no aggregated data on occupational health and safety performance available, and no formal worker grievance mechanism is in place.
Gaps identified against EBRD standards were included in an advisory environmental and social action plan (ESAP) that was shared with the client. They include a recommendation to develop and implement an integrated environmental and health and safety (EHS) management system, which assumes the allocation of EHS responsibilities within the Company's management team, assessment of risks and legal compliance, and the development of a systematic approach to planning, improving and monitoring EHS performance, as well as building internal capacity for successful implementation. The ESAP further contains recommendations to benchmark MagtiCom's current approach to electric and electronic waste management against the EU WEEE Directive and to fill any gaps identified in the process; finally, MagtiCom should develop a formal worker grievance mechanism to manage potential issues associated with a rapidly expanding workforce.
The environmental and social performance of MagtiCom shall be monitored via annual environmental and social reporting by the Company, but ESD reserves the right to undertake a monitoring visit as it sees fit, such as in the event of annual reporting not being satisfactory.
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