Passing Wind to syndication
Financing for Wind SpA (a fixed-mobile network joint venture
between Italian electricity supplier Enel, Deutsche Telekom and
France Telecom) got underway mid-May amid a much anticipated flurry
of bids for the arranging mandate. The financing will fuel Wind's
expansion drive to become the leading alternative operator in
Italy, Europe's largest mobile telecommunications market.
A well attended bank meeting for the syndication of the Eu2.4 billion ($2.67 billion) project financing was held mid-May in Rome.
Bankers close to the deal claim to be impressed with some of the aspects of the structure, in particular its drawdown restrictions: These relate to the borrower meeting specified annual revenues and a number of connections.
Arrangers ABN Amro, Banca Commerciale Italiana, Citibank, Schroder Salomon Smith Barney, Dresdner Kleinwort Benson, JP Morgan and BNP Paribas have invited banks to join as arrangers and co-arrangers for commitments of Eu150 million or Eu100 million respectively. General syndication is earmarked for the end of June.
The deal is priced at 90bp over Libor out of the box. This ratchets down through its 9.5 year maturity based on debt-to-Ebitda ratios. The facility is split between two tranches ? a Eu2 billion term loan and a Eu400 million non-amortising revolver.
Project financing was initially proposed when the company was already relatively strong. L3 trillion of equity had already been injected into Wind, an amount sufficient to finance the company's first year. ?We went the project finance way because we wanted a fully funded business plan arranged by the banking markets,? explains PierPaolo Cristofori, CFO at Wind. ?We believed in our credit merit, so we desired a non-recourse loan that provided a sufficient level of flexibility,? he adds.
The growth of the telecommunications industry is fast and burgeoning. With the relentless advent of new technologies, any industry player needs to advance a sharp technological edge. The infrastructure deployed by Wind noticeably accounts for this aspect of the market.
?We have a strong belief in our infrastructure,? says Cristofori. ?This is where our advantage lies,? he adds. ?We are developing a convergence of fixed, mobile and internet technologies, and we are deploying a vast infrastructure ranging from transmission up to access.?
Based on a fixed and mobile network, Wind's telecommunications infrastructure integrates an intelligent network which handles all fixed, mobile, and convergence services. This is a vital move in a market where all operators are vying to position themselves higher on the value chain.
Indeed, Wind's fixed-mobile convergence solution is a first in Europe and its broad portfolio of services, embracing both Internet and intranet offerings, have enabled it to secure significant market share already.
Wind currently has 11,000km of operational fibre-optic (dark fibre) backbone leased from Enel and equipped with synchronous digital hierarchy (SDH) technology capable of being booted to dense wave division multiplexing (DWDM). This technology increases potential dark fibre capacity by up to 40 times. Deliveries of MSH-series compact STM-1 multiplexers commenced during August 1999, and will continue throughout the two year contract with supplier Marconi.
Marconi's unsurpassed SDH transmission equipment will equip metropolitan network rings and the access network for base stations and customers in Wind's combined fixed and wireless network. Multiplexers in the SDH access network connect residential and business customers to the SDH network in a highly cost-effective way. Extending SDH beyond the access network and into the customer's workplace enables network operators to manage their investment as one unified network solution.
Wind is very active in access provision at two levels. First, its metropolitan area networks penetrate seven major cities with 230-250 km of operational fibre-optic rings, with short term plans to up urban fibre-optic capacity. Second, Wind's fixed-mobile network is hoped to encompass all of Italy over the next two years, with an expected population cover of more than 55% in over 220 cities ? bold prospects for a fledgling company. To this end, Wind has disbursed upwards of Eu1 billion until the end of 1999. A similar expenditure is expected this year.
The next battle for the industry is expected to be waged over the new generation of mobile telephones, the so-called Universal Mobile Telecommunications Services (UMTS) that are designed to provide more rapid access to the internet through wireless telephones.
UMTS is expected to become the launch pad for the expansion of the internet in Italy where the e-economy has been held back by the low penetration of personal computers in Italian households.
The government is due to award within the year five UMTS licenses and already the country's existing and prospective new mobile operators are scrambling to put together their bids.
The issue behind the scramble to secure the new licenses is that it provides a new opening into the lucrative and explosive domestic mobile market.
At present, there are four wireless operators in Italy where the penetration of wireless telephones has now reached more than 50% of the population and is expected to increase further to between 60% and 70%. The operators are market leader and former monopolist Telecom Italia, followed by Omnitel, Wind and Bluetel.
All four existing operators appear to have the strongest chances of securing a new UMTS license, leaving a fifth license for a newcomer. Tiscali, the free internet start-up, is anxious to secure this license to provide it with the necessary infrastructure to provide its activities with a more solid base.
Perhaps the most innovative aspect of financing for Wind is that this is the first time for a project financing that a significant chunk of the transaction is likely to derive from the outcome of the impending UMTS licensing, which lies outside the scope of the business plan. This fact ensures that there is no impact on syndication risk.
The current intense maneuvering in the fast changing Italian telecommunications sector is attracting increasing attention from large foreign groups interested in securing a foothold in the Italian market.
A would-be threat to investor confidence is the international arbitration case against sponsor Deutsche Telekom. Deutsche Telekom was excluded from the management of Wind and sued by ENEL after promoting a merger with Telecom Italia SpA, when the latter was under attack by Olivetti SpA. The merger plan was abandoned after Olivetti took over Telecom Italia. Wind has also sued Deutsche Telekom for damages.
Ironically, these gusty legal battles are likely to reinforce, rather than erode, international confidence, since all the shareholders are fighting to retain their highly profitable pieces of Wind.
?We have demonstrated conclusively that we are already a very robust asset. Our links to the sponsors are minimal. Our independent management can clearly deliver results, and we have already proved ourselves at the development stage. We have shown that Wind can fly on its own?, maintains Cristofori.
Indeed, impressive commercial results give weight to these words. In under 12 months, Wind has upwards of 3.5 million clients. More than 2 million of these are mobile subscribers, whose appetite appears to be boundless. Wind estimates it will have 6 million clients by end-2000. No other operator has had this result. Wind, it seems, is set to blow aside the competition.
A well attended bank meeting for the syndication of the Eu2.4 billion ($2.67 billion) project financing was held mid-May in Rome.
Bankers close to the deal claim to be impressed with some of the aspects of the structure, in particular its drawdown restrictions: These relate to the borrower meeting specified annual revenues and a number of connections.
Arrangers ABN Amro, Banca Commerciale Italiana, Citibank, Schroder Salomon Smith Barney, Dresdner Kleinwort Benson, JP Morgan and BNP Paribas have invited banks to join as arrangers and co-arrangers for commitments of Eu150 million or Eu100 million respectively. General syndication is earmarked for the end of June.
The deal is priced at 90bp over Libor out of the box. This ratchets down through its 9.5 year maturity based on debt-to-Ebitda ratios. The facility is split between two tranches ? a Eu2 billion term loan and a Eu400 million non-amortising revolver.
Project financing was initially proposed when the company was already relatively strong. L3 trillion of equity had already been injected into Wind, an amount sufficient to finance the company's first year. ?We went the project finance way because we wanted a fully funded business plan arranged by the banking markets,? explains PierPaolo Cristofori, CFO at Wind. ?We believed in our credit merit, so we desired a non-recourse loan that provided a sufficient level of flexibility,? he adds.
The growth of the telecommunications industry is fast and burgeoning. With the relentless advent of new technologies, any industry player needs to advance a sharp technological edge. The infrastructure deployed by Wind noticeably accounts for this aspect of the market.
?We have a strong belief in our infrastructure,? says Cristofori. ?This is where our advantage lies,? he adds. ?We are developing a convergence of fixed, mobile and internet technologies, and we are deploying a vast infrastructure ranging from transmission up to access.?
Based on a fixed and mobile network, Wind's telecommunications infrastructure integrates an intelligent network which handles all fixed, mobile, and convergence services. This is a vital move in a market where all operators are vying to position themselves higher on the value chain.
Indeed, Wind's fixed-mobile convergence solution is a first in Europe and its broad portfolio of services, embracing both Internet and intranet offerings, have enabled it to secure significant market share already.
Wind currently has 11,000km of operational fibre-optic (dark fibre) backbone leased from Enel and equipped with synchronous digital hierarchy (SDH) technology capable of being booted to dense wave division multiplexing (DWDM). This technology increases potential dark fibre capacity by up to 40 times. Deliveries of MSH-series compact STM-1 multiplexers commenced during August 1999, and will continue throughout the two year contract with supplier Marconi.
Marconi's unsurpassed SDH transmission equipment will equip metropolitan network rings and the access network for base stations and customers in Wind's combined fixed and wireless network. Multiplexers in the SDH access network connect residential and business customers to the SDH network in a highly cost-effective way. Extending SDH beyond the access network and into the customer's workplace enables network operators to manage their investment as one unified network solution.
Wind is very active in access provision at two levels. First, its metropolitan area networks penetrate seven major cities with 230-250 km of operational fibre-optic rings, with short term plans to up urban fibre-optic capacity. Second, Wind's fixed-mobile network is hoped to encompass all of Italy over the next two years, with an expected population cover of more than 55% in over 220 cities ? bold prospects for a fledgling company. To this end, Wind has disbursed upwards of Eu1 billion until the end of 1999. A similar expenditure is expected this year.
The next battle for the industry is expected to be waged over the new generation of mobile telephones, the so-called Universal Mobile Telecommunications Services (UMTS) that are designed to provide more rapid access to the internet through wireless telephones.
UMTS is expected to become the launch pad for the expansion of the internet in Italy where the e-economy has been held back by the low penetration of personal computers in Italian households.
The government is due to award within the year five UMTS licenses and already the country's existing and prospective new mobile operators are scrambling to put together their bids.
The issue behind the scramble to secure the new licenses is that it provides a new opening into the lucrative and explosive domestic mobile market.
At present, there are four wireless operators in Italy where the penetration of wireless telephones has now reached more than 50% of the population and is expected to increase further to between 60% and 70%. The operators are market leader and former monopolist Telecom Italia, followed by Omnitel, Wind and Bluetel.
All four existing operators appear to have the strongest chances of securing a new UMTS license, leaving a fifth license for a newcomer. Tiscali, the free internet start-up, is anxious to secure this license to provide it with the necessary infrastructure to provide its activities with a more solid base.
Perhaps the most innovative aspect of financing for Wind is that this is the first time for a project financing that a significant chunk of the transaction is likely to derive from the outcome of the impending UMTS licensing, which lies outside the scope of the business plan. This fact ensures that there is no impact on syndication risk.
The current intense maneuvering in the fast changing Italian telecommunications sector is attracting increasing attention from large foreign groups interested in securing a foothold in the Italian market.
A would-be threat to investor confidence is the international arbitration case against sponsor Deutsche Telekom. Deutsche Telekom was excluded from the management of Wind and sued by ENEL after promoting a merger with Telecom Italia SpA, when the latter was under attack by Olivetti SpA. The merger plan was abandoned after Olivetti took over Telecom Italia. Wind has also sued Deutsche Telekom for damages.
Ironically, these gusty legal battles are likely to reinforce, rather than erode, international confidence, since all the shareholders are fighting to retain their highly profitable pieces of Wind.
?We have demonstrated conclusively that we are already a very robust asset. Our links to the sponsors are minimal. Our independent management can clearly deliver results, and we have already proved ourselves at the development stage. We have shown that Wind can fly on its own?, maintains Cristofori.
Indeed, impressive commercial results give weight to these words. In under 12 months, Wind has upwards of 3.5 million clients. More than 2 million of these are mobile subscribers, whose appetite appears to be boundless. Wind estimates it will have 6 million clients by end-2000. No other operator has had this result. Wind, it seems, is set to blow aside the competition.
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