Wataniya Telecom this summer closed the US$490 million medium-term financing of its mobile services subsidiary in Algeria to fund construction of the network and pay for its expansion throughout the country

Wataniya Télécom Algérie, which operates under the trade name Nedjma, needed the funds to give it nationwide coverage and help it compete in a country where at the time of its launch there were 9.8 million mobile phone subscribers, according to the telecoms regulatory authority (ARPT).

In addition to Wataniya, which went live in August 2004, there are two other operators active in the country – Algerie Telecom and Orascom Telecom Algeria.

Wataniya Télécom Algérie was awarded Algeria's third GSM license by ARPT in December 2003 with a winning bid of US$421m. It is licensed to operate a dual band (GSM900 and GSM1800) network for an initial period of 15 years.

The telco is owned and operated by Wataniya and the other shareholders are Gulf Investment Corporation and United Gulf Bank.

Wataniya Télécom Algérie is a subsidary Wataniya Telecom, a Kuwaiti telecoms company founded in 1997, which has operated a GSM network in Kuwait since 1999.

It was selected together with eight bidders by the Algerian regulator after the pre-qual process and won the contract on the strength of similar activities. It is involved in the development of the Tunisiana GSM network and the development of the Asia-Cell GSM network in Northern Iraq, as well as the US$421m package it put together for Algeria’s third GSM license.

Wataniya beat off competition from the closest competitors Telefonica of Spain which came in second with a bid of US$409m and MTN of South Africa, which was third placed with a bid of US$375m.

This license win gave Wataniya market presence in four countries – Kuwait, Tunisia, Iraq and Algeria.

Rationale

Wataniya Télécom Algérie was particularly keen to take a slice of the Algerian market as it has a population of 32.2 million with a real per capita GDP of US$1,855.

At the time of the deal, Algeria’s mobile penetration rate was only 4.5 per cent. In fact, it was estimated that there were more than 900,000 requests on demand that were not being satisfied by the two existing networks.

Wataniya Télécom chairman Faisal Al-Ayyar says: ‘Algeria has proved that a proper privatisation programme with transparent processes attracts foreign investment that will favourably stimulate the economics of the country and we hope this trend will continue in the region.

‘Wataniya Telecoms Algeria network deployment programme commenced immediately with a target of providing a service level expected by the Algerian people within six months.’

Financing

Citigroup acted as global coordinator for the US$490m equivalent medium-term financing, combined with the US$421m committed equity, which completes the permanent capital structure of Nedjma.

Nedjma, which launched its mobile network on 25 August 2004, already has more than 700,000 subscribers – a figure that is expected to continue its meteoric rise. This figure has now risen to more than one million.

The multi-sourced financing package was structured and led by Citigroup and is to be repaid over seven years.

The finance plan incorporates:

• a local Algerian Dinar (AD) facility of US$44.5m equivalent
• a local AD facility of US$22m equivalent guaranteed by development finance institutions DEG of Germany, FMO of the Netherlands and Proparco of France
• an international facility of U$110m covered by Hermes
• international facilities of US$173.5m provided by international and regional financial institutions and development finance institutions

Mark Aplin, managing director of infrastructure and energy finance at Citigroup, says: ‘This was a complex transaction involving many different parties and was the largest local currency project financing that has been done to date. It was, to my knowledge, the largest local currency financing that has been done to date, syndicated among local banks. It was the first project financing in the telecoms sector in Algeria, building on the success of Algerian Cement Company.

‘It involved three different ECAs as well as a broad group of local and international banks. As a result, there was a lot of coordination that was needed. It was helped by a very strong management team at Wataniya and a clear commitment from Wataniya Telecom International.’

Legal

Legal advice was provided by a line-up of heavyweights from Slaughter and May, Allen & Overy and a local outfit of Depardieu Brocas Maffei – led by Antoine Maffei and Jean-Renaud Cazali – appointed as special advisers to Wataniya Telecom in relation to all Algerian legal matters.

The Slaughters team – acting for the borrower – was led out of the Paris team by Alexander Blackburn. The A&O team was led, also from the firm’s Paris office, by Rod Cork who was advising the lender.

Conclusion

With a stronghold in three other countries – Kuwait, Tunisia and Iraq – the Kuwaiti telco was keen to gain a foothold in Algeria as its third mobile telecoms provider in a market that was crying out to be offered telecoms.

As one of the few markets left where there is single digit percentage density of mobile users, Algeria was all the more attractive to the telecoms minor.

Impressively, it managed to fight off two serious contenders to scoop the license with a bigger bid.

Once secured, the telco had to roll out a major investment programme to give it border-to-border coverage. This saw no lack of interest from local and international banks, as well as a handful of credit export agencies.

Following as it does, the impressive Algerian Cement Company financing, and then preceding a host of water and power projects – the Wataniya deal may not have been the pathfinder, but it certainly marked out the route for all to follow.

Project at a glance

The project at a glance