MTN Cameroon: mobile spread
Demand for mobile telephones in Sub-Saharan Africa is on the rise
and project financings are beginning to play a role. MTN Cameroon
is the most recent entity to turn to the commercial markets to
raise funds for its Eu180 million limited recourse project. The
venture, 70% owned by South Africa's MTN and 30% by Broadband
Telecom, is currently in syndication for Eu95 million of debt.
The project facility has been a long time coming and will in part be used to take out a one-year bridge loan. This was put in place by arrangers Standard Bank and Citibank in order to fund initial build out following MTN's successful bid for Camtel-Mobile. Although this privatised section of state incumbent Camtel had been operational, MTN Cameroon largely started building from scratch. Ericsson, which has previously worked with MTN on a number of African projects, have now replaced the existing Siemens infrastructure with a complete turn-key network, including GSM, a prepaid system, transmission, services and civil works. The current financing will allow expansion and enhancement of this basic network.
Ericsson are believed to have played a guarantor role in the bridging loan but have not extended this to the project facility. Banking appetite is nevertheless said to be more than adequate, not least because of the export credit cover secured. Standard Bank and Citibank acted as arrangers again and have split the debt into a 6-year Eu60 million international tranche and a 5-year Eu35 million local tranche, being syndicated separately. The former has attracted 100% political and 50% commercial cover from the Swedish Export Credit Guarantee Board, EKN. Tickets have been offered on a club basis at Eu10 million, Eu7.5 million and Eu5 million.
The local tranche, on the other hand, is allegedly heavily oversubscribed in a general syndication. This facility benefits from enhancement by both the African Development Bank and Dutch development agency SMO. Both tranches should be signed and sealed by the end of July.
This is the first project financing for a telecoms deal in Cameroon and financiers in the region are still on a fairly steep learning curve. The local players have very limited experience and the international players are wary of Cameroon. Illustrating this, MTN Cameroon's financing was originally launched at the end of last year but then subsequently pulled back for alterations before re-launch. This decision was based on a re-analysis of the local situation once the network had been partially built out. Although there was apparently no major structural change to the financing, capex and debt were both reduced.
France Telecom, through its subsidiary FCR, has been rolling out the second GSM license in Cameroon since July 1999, having stated an intention to sell a 30% equity interest to Cameroonian partners. Camtel has been promised a third license once it has privatised but rumour has it that this will probably be a fairly protracted process. Nevertheless, the pressure of competition is likely to kick in with all players trying to secure the majority of the market.
The project facility has been a long time coming and will in part be used to take out a one-year bridge loan. This was put in place by arrangers Standard Bank and Citibank in order to fund initial build out following MTN's successful bid for Camtel-Mobile. Although this privatised section of state incumbent Camtel had been operational, MTN Cameroon largely started building from scratch. Ericsson, which has previously worked with MTN on a number of African projects, have now replaced the existing Siemens infrastructure with a complete turn-key network, including GSM, a prepaid system, transmission, services and civil works. The current financing will allow expansion and enhancement of this basic network.
Ericsson are believed to have played a guarantor role in the bridging loan but have not extended this to the project facility. Banking appetite is nevertheless said to be more than adequate, not least because of the export credit cover secured. Standard Bank and Citibank acted as arrangers again and have split the debt into a 6-year Eu60 million international tranche and a 5-year Eu35 million local tranche, being syndicated separately. The former has attracted 100% political and 50% commercial cover from the Swedish Export Credit Guarantee Board, EKN. Tickets have been offered on a club basis at Eu10 million, Eu7.5 million and Eu5 million.
The local tranche, on the other hand, is allegedly heavily oversubscribed in a general syndication. This facility benefits from enhancement by both the African Development Bank and Dutch development agency SMO. Both tranches should be signed and sealed by the end of July.
This is the first project financing for a telecoms deal in Cameroon and financiers in the region are still on a fairly steep learning curve. The local players have very limited experience and the international players are wary of Cameroon. Illustrating this, MTN Cameroon's financing was originally launched at the end of last year but then subsequently pulled back for alterations before re-launch. This decision was based on a re-analysis of the local situation once the network had been partially built out. Although there was apparently no major structural change to the financing, capex and debt were both reduced.
France Telecom, through its subsidiary FCR, has been rolling out the second GSM license in Cameroon since July 1999, having stated an intention to sell a 30% equity interest to Cameroonian partners. Camtel has been promised a third license once it has privatised but rumour has it that this will probably be a fairly protracted process. Nevertheless, the pressure of competition is likely to kick in with all players trying to secure the majority of the market.
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