Afghanistan rarely generates positive news these days, so it is good to see an interesting deal of note close in the country. Five individual lenders came together in July last year to support a total of US$65mn for Telecom Development Company Afghanistan (TDCA) – known as Roshan.
Standard Bank Plc in London led a US$10mn commercial tranche of financing (lending US$5mn itself) with National Bank of Pakistan (lending the other US$5mn), which was part of a multisourced facility in union with various development financing institutions (DFIs).
It is the first ever cross-border private sector loan to Afghanistan from a variety of leading multilateral institutions and commercial banks. And the loan will significantly enhance Roshan’s network coverage for Afghanistan.
The ADB has committed US$35mn, France’s Proparco US$10mn, and Germany’s DEG US$10mn. While DEG and Standard Bank are providing loans to Roshan for the first time, the loans by the ADB and Proparco are second round loans being made by these financial institutions to Roshan. The first loans, in May 2005 from ADB and Proparco were for a combined US$45mn and involved Alcatel with €33mn, who later sold its portion on to Standard Bank. This financing supported the sale of telecoms equipment to Roshan.
For the latest deal, the ADB is providing political risk guarantees for the final two years of the commercial bank tranche. The loans from the DFIs have a tenor of six years, while the commercial lending runs for five years.
Most commercial institutions would shy away from Afghanistan but there were several factors that influenced Standard to get involved and stay with the deal. Not least were the solid foundations of Roshan itself. The firm is the leading GSM mobile provider in Afghanistan and is owned by an international consortium made of The Aga Khan Fund for Economic Development (AKFED) – 51%; Monaco Telecom International (MTI), a subsidiary of Cable and Wireless – 36.75%; and MCT Corp – 12.25%.
Commercial launch of the network began on July 27, 2003. By August Roshan had over 850,000 subscribers representing some 60% of the total. Coverage extends to 38% of the total population in over 57 cities and a total of over 150 including towns, in 27 provinces.
In February 2005, Roshan won the ‘Best Marketing Award’, announced at the mobile industry’s leading annual event, the 3GSM World Congress 2005, in Cannes, France.
Standard was initially approached by Alcatel, who had supplied equipment to Roshan. “The due diligence process focused on Roshan specifically, and the ownership involvement of AKFED, which we felt provided a very credible enhancement to the company and its ability to deliver on its business plan,” says David Locking, director, investment banking and trade, at Standard Bank Plc, in London.
“Additionally, the Aga Khan Development Network (AKDN) has been involved in a host of social developmental activities in Afghanistan for many years and before Roshan commenced operations,” he adds.
“Roshan had, in early 2005, raised financing from both the ADB and Proparco and this demonstrated to us, as linkage to the international effort in Afghanistan, that Roshan’s role was recognised and important to those efforts.
“With Roshan’s growth plans approved by the shareholders this gave us the further opportunity to work jointly with these institutions, and DEG, to provide the expansion financing.”
Karim Khoja, chief executive officer of Roshan, comments: “We are very pleased to be working with Standard Bank on this second round of financing. Bringing in a commercial bank into the financing is a first for Afghanistan. We have been impressed with the approach taken by Standard Bank and their openness to understand the business and the issues faced in Afghanistan. The fact that a commercial bank has come to Afghanistan obviously helps us in our growth plans, but more importantly, by taking such a risk, will open the doors for other banks to invest in Afghanistan, which will lead to faster growth in telecoms and other sectors.”
Borrower: Telecom Development Company Afghanistan (TDCA) – Roshan
Sponsors: AKFED; Monaco Telecom International; MCT Corp
– ADB loan: US$35mn
– DEG loan: US$10mn
– Proparco loan: US$10mn
– Standard Bank loan: US$5mn
– National Bank of Pakistan: US$5mn
Lead arranger: Standard Bank plc
Tenor: Up to 6 years
Law firms: Linklaters (lenders);Allen & Overy (borrower)
Date signed: July 2006