Initial mandated lead arrangers (IMLAs) and global co-ordinators Standard Chartered Bank and KfW Ipex were joined by mandated lead arranger (MLA) HSBC and a host of other arrangers mid-year for what turned out to be the biggest telecom financing to date in Bangladesh.
The US$330mn transaction involved a complex financing package that included project financing structures and corporate support, the integration of domestic and international bank consortiums, and development financial institution (DFI) and export credit agency (ECA) support.
Orascom Telecom Bangladesh (formerly Sheba Telecom) borrowed a total of US$330mn, divided into a US$50mn domestic syndicated loan (denominated in Bangladeshi taka), a US$120mn syndicated term loan supported by Euler Hermes, a US$130mn syndicated commercial term loan, and a US$30mn term loan provided by Germany’s DEG and the Netherlands” FMO.
The facilities have been put in place to (i) refinance short-term facilities granted by equipment vendors Huawei and Siemens and (ii) fund the company’s expansion.
Orascom Telecom Holding (OTH) is guaranteeing all facilities.
The financing has been structured in a way that would allow it to change easily into a non-recourse financing if and when Banglalink’s performance is good enough to allow the lender to consider a release of the corporate guarantee.
Another feature is that it puts a wide range of lenders: DFIs, ECAs, international banks, local banks, under a single common terms agreement and security package, which is quite effective from the borrower’s perspective
Michel Hubert, director, corporate finance, at OTH, says: “This transaction has allowed Banglalink to fund its extremely rapid expansion. A really marginal operator in a five-player market by the time it was acquired, Banglalink is now Bangladesh’s second-largest mobile operator by subscribers and revenues, and the major competitor to Grameen Phone (the dominant mobile operator).”
In September 2004, Orascom Telecom Venture, a fully-owned subsidiary of Orascom Telecom Holdings, purchased 99.99% of Sheba Telecom’s shares for US$50mn. Since then, Orascom installed a new management, invested in the upgrading of the network, set up a distribution network and points of sale, and re-branded operations as ‘Banglalink’.
In February 2005, the firm re-launched its re-branded network which, for the first time, was capable of offering pre-paid services in nine major cities in Bangladesh.
Banglalink’s range of products and offers was further expanded between 2005 and 2006, and it began to rapidly acquire new customers. By September 2007, Banglalink had over 6mn customers, from just over 3mn as of January of the same year, while its market share has grown to 18.9% from approximately 15.6% in December 2006.
The emergence of Banglalink as a very aggressive challenger to the pre-existing quasi-duopoly (Grameen Phone and Aktel) has transformed the mobile telecommunications landscape, prompting real competition, pushing prices down, with mobile penetration rates shooting up as a result (now reaching over 20%).
“Looking ahead, Banglalink will continue to invest heavily but the arbitrage between shareholder funds and local financing is shifting in favour of the former, for the time being,” adds Hubert.
Borrower: Orascom Telecom Bangladesh (Banglalink)
- US$50mn equivalent domestic syndicated loan
- US$120mn syndicated term loan supported by Euler Hermes
- US$130mn syndicated commercial term loan
- US$30mn term loan provided by two DFIs
Initial MLAs and global co-ordinators: Standard Chartered; KfW Ipex
Arrangers (US$): Calyon; EDC Helaba; HSH; IKB; RZB; SMBC; Standard Bank
Citibank; Eastern Bank; Mutual Trust Bank; National Bank; Pubali Bank; Standard Chartered; UCBL; Uttara Bank
DFIs: DEG; FMO
ECA: Euler Hermes
Law firms: Allen and Overy, London; Huq & Co, Dhaka (lenders); White & Case, London; SIA, Dhaka (borrower)
Lenders’s technical and market consultant: Ovum
Tenor: 5-7 years
Date signed: June 2007