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US$ 190 million EBRD benchmark deal connects with Romania's CONNEX GSM
To finance the rapid expansion of CONNEX GSM, one of Romania's two mobile telecommunication networks, the European Bank for Reconstruction and Development (EBRD) has arranged and partially financed a US$ 190 million (ECU 168 million) loan facility to the operator, MobiFon S.A. a consortium company led by Telesystem International Wireless Inc (TIW) of Canada and AirTouch Communications of the United States. The package includes the first major syndicated long-term loan for a private Romanian company, establishing an important benchmark for future deals in the country.
Noreen Doyle, Deputy Vice President and Director of Risk Management at the EBRD, said: "Until today, there has been no substantial medium or long-term financing from the international capital markets available for private companies in Romania. The commercial banks' interest in MobiFon highlights an important milestone for Romanian debt and is a strong signal of future activity in the country. We are encouraged that the market has accepted the long maturities appropriate to this start-up operation in a clearly important area of infrastructure."
The EBRD package comprises a senior loan of US$ 135 million, of which the EBRD provides a US$ 65 million nine-year tranche and has syndicated a US$ 70 million eight-year tranche to seven commercial banks. The Bank is also providing US$ 10 million in subordinated debt for the company. Two parallel loans totalling US$ 45 million from the Canadian Export Development Corporation and the Nordic Investment Bank are being provided with the same terms and conditions as the EBRD loan and with a nine-year final maturity. This is the first time that these institutions have participated in a commercial financing for a private sector company in Romania.
"We are very pleased to have concluded this major credit facility with this consortium of international lenders for our Romanian subsidiary, MobiFon," commented Pierre Fitzgibbon, Chief Financial Officer of TIW. "This long term project financing provides the cornerstone for growth of one of TIW's key operations."
Sorin Pantis, Minister of Communications, said: "Competition will result in increased quality services for subscribers. We recognise that the two competitors in the GSM mobile telephony market will bring a new standard of telecommunications service to Romania."
Peter Reiniger, Director of the EBRD's Telecom team, said: "In a country where current telephone penetration is still relatively low, the EBRD's financing means greater access to telecommunication systems of international standards for the Romanian people. Such systems can facilitate greater economic activity as well as a more rapid development in infrastructure."
With the proceeds, MobiFon will expand its existing GSM network, which it launched commercially in April this year, five months after being granted the operating licence. Al Tolstoy, President and CEO of MobiFon, commented: "After having completed the fastest world-wide launch of any GSM system between licence award and commercial operation, we are continuing to see strong growth in subscriber numbers and usage of the system. There is tremendous pent-up demand for our service."
Since launching the service on 15 April 1997, MobiFon under its brand name CONNEX GSM, has connected over 40,000 subscribers and now covers 34 per cent of the population. MobiFon currently employs 550 people. Future coverage is to include all major cities, European and national roads and all international and national airports.
MobiFon S.A. is a consortium of North American and Romanian partners: TIW (through its subsidiary Telesystem International Wireless Corporation N.V., the principal shareholder with 60 per cent), AirTouch (through its subsidiary AirTouch Europe N.V.) plus, from Romania, Logic Telecom S.A., Ana Electronic Srl, ISAF S.A., R.A. Posta Romana and the Romanian Investment Fund. TIW and AirTouch both have extensive experience in the construction and operation of cellular networks.
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