In March 2007, Citi acted as sole arranger for a loan for Millicom Tanzania (Tigo) that totalled US$22.45mn. The transaction is the first financing in Tanzania under Opic’s Africa-Middle East Risk Sharing Framework and the first local currency guarantee provided by Citigroup under the framework.This US$125mn framework facility is a risk share facility that provides Citi with additional cross-border and credit capacity in the 12 Sub-Saharan African countries that are eligible for the facility thus providing the bank with a clear strategic advantage.
“Citi leveraged its position as the only bank in Tanzania capable of offering this type of financing utilising Opic support whereby Millicom received the most optimal pricing and deal execution in the shortest time possible,” says Martin Mugambi, director, head of corporate finance, East Africa & non-presence countries at Citibank NA South Africa.
Citi Tanzania provided Tanzanian shillings for a US$5mn local currency tranche. Citi provided a further US$17.45mn hard currency tranche guaranteed by Opic under the risk-sharing framework.
A comprehensive guarantee from Opic under the Africa-Middle East Risk Sharing Framework provided 75% cross-border and credit defeasance for Citi’s loan in this instance.
The door-to-door tenor of the facility was five years with an average life of 2.75 years.
Millicom was the first cellular operator in Tanzania, starting operations in 1994. It is now the third largest provider with 20% market share. MIC, a leading operator of mobile services in emerging markets, owns 100% of Millicom Tanzania.
MIC is a global cellular telecom operator with 16 operations across Africa, Asia and South and Central America. The group is headquartered in Luxembourg. The company focuses primarily on emerging markets where basic phone services are poor and wireless penetration rates are low.
The telecoms firm has pioneered the introduction of pre-paid cellular telephony in its markets and aims to provide subscribers with the price-leading brand in each market by offering low cost services. As at December 31, 2007, MIC’s worldwide subscriber base was approximately 23.3mn.
“To optimise on the clear growth potential in the Tanzanian market, Millicom Tanzania has embarked on a network expansion through this facility to fund its expansion and introduction of 3-G functionalities into its product base, as well as expanding its geographical coverage in its main markets (urban centres of Tanzania) and some strategic rural markets,” adds Mugambi.
With Tanzania’s cellular penetration at around 9-10%, the scope for growth in the industry is still considered to be very good and Millicom Tanzania is setting itself up to capitalise on this growth.
Millicom Tanzania (Tigo)
- US$5mn LCY equivalent
Guarantor: Opic for tranche A
Citi roles: Sole lender, lead arranger, Opic facility agent
Tenor: 5 years (2.75 average life)
Date signed: March 2007