JOHANNESBURG, South Africa-South African mobile network operator Vodacom announced it entered a “highly innovative” financing arrangement that minimizes the risk exposure of individual stakeholders in the establishment of Vodacom Congo.
The Vodacom Group, through its subsidiary Vodacom International, acquired 51 percent of the new Vodacom Congo entity for an equity investment of US$39 million.
Of this, US$12 million was paid to Congolese Wireless Networks (CWN) as settlement for its assets, which have been absorbed into Vodacom Congo, leaving the new company with cash-in-hand of US$27 million.
To accelerate the launch of phase one of the Vodacom Congo network, the company signed a five-year supply agreement with Alcatel. This includes an initial US$62 million contract for the first phase of the project leading up to the rollout of the network and US$23 million per annum thereafter.
As part of its commitment to the project and to Vodacom Congo, the French equipment supplier offered the new company credit terms of 24 months. The transaction has been discounted with the South African-based ABSA bank, with the Vodacom Group guaranteeing 51 percent of the transaction.
“This effectively gives the new company the bridging finance required to launch the network in record time, with Vodacom SA’s only commitment being its 51-percent guarantee,” said Debbie Millar, executive head of Vodacom Group’s treasury, tax and financial planning.
“With Alcatel and ABSA both sharing our risk, this financing agreement is a clear vote of confidence in the Vodacom Group and Vodacom Congo,” she said.
Now with the completion of phase one, the financing agreement will be extended to additional phases of the project, with Standard Bank of London acting as financial managers and facilitators. Project funding is expected to peak by end-2002 at between US$110 million, and US$130 million will replace the current bridging financing arrangement.
“This new funding, raised by Standard Bank from investors in Europe, who have already exhibited a clear appetite for providing financing for the project, will have limited recourse to Vodacom SA,” Millar concluded.
