Arranged for twin companies Vesper SA and Vesper SP, the financing catered for the provision of voice and data communication networks across the areas of Sao Paolo and several states in the north-eastern part of the country including the cities of Rio de Janeiro and Belo Horizonte. The project will provide services for a total 125 million people covering two thirds of the country.

Equipment suppliers will provide the biggest wireless local loop in Latin America. Vesper is also one of the largest greenfield telecoms projects ever done in Brazil after the $2.3 billion financing for the BellSouth's mobile phone concession in Sao Paolo awarded in March 1998.

Sponsoring Vesper's twin ventures is an international consortium made of VeloCom (49.4%) Bell Canada International (34).4% and Qualcomm (16.2%). Local Agencia Nacional de Telecominicacoes awarded it the licence in the first half of 1999 under the contractual obligation of starting service before year-end. Equipment suppliers won contracts in July 1999. Service in 29 cities, out of the 55 covered by the project, started running by the end of December 1999.

Financing is split between Vesper SA and SP and funded by the project's equipment suppliers. Nortel Networks, Ericsson and Harris Corporation will provide $1.05 billion of vendor financing to the Vesper SA network while Lucent Technologies will be responsible for a total of $780 million to fund Vesper SP. Both facilities were signed on December 27, 1999.

According to sources close to Societe Generale - the adviser to the suppliers of Vesper SP - Lucent is looking at selling on a substantial amount of its debt but no more than 25%. Support from multilateral agencies such as US Ex-Im and the Overseas Private Investment Corporation has been sought.

Meanwhile ABN Amro, financial adviser to the suppliers of Vesper SA, is looking at selling Nortel's $700 million credit to the banking market, but only after an assessment of the project performance and not before three years have elapsed.

Milbank Tweed Hadley & McCloy acted as legal adviser to the consortium. Glenn Gerstell, managing partner at Milbank Tweed in Washington says: "The main challenge for the deal was time. We managed to do a six-month job in two months to reach the target of December 1999. Other challenges included the creation of a structure for the deal that had many other transactions included in it. Access to high yield capital financing was ruled out due the lack of confidence in the Latin American bond market, although the outlook for it has now changed."

Citibank acted as financial adviser to the consortium. Scott Sutliff, assistant vice-president in global project finance at Citibank in New York says: "Financing for the mirror licenses has been a very interesting experience but certainly a challenging one. When the two licenses were awarded it was a difficult time to do business in Brazil. The environment has now changed a lot and is now beyond anybody's expectation."

Robert Birch, chief financial officer at Vesper SA in Rio de Janeiro says: "Financing for the transaction has been put together in a way to allow access to non-recourse financing by banks at a later stage. This will be achieved one in the next three and once the ongoing stabilization in the Brazilian economy will reach a favourable level for the attraction of foreign capital." Canada's Export Development Corporation is looking with interest at Nortel's role in the Vesper SA deal.

The next Brazilian telecom deal to come to the market is the refinancing of $2.3 billion Sao Paolo concession. Financial close is expected by the end of March 2000. Lead arrangers for the transaction are ABN Amro, WestLB and Bank of America. Milbank Tweed Hadley & McCloy has been appointed legal adviser to the lenders.