GP to take Tk 2.0b syndicated loan for capacity expansion

FE Team | Published: September 10, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

A Z M Anas
Local cell phone goliath-GrameenPhone-will mobilise Tk 2.0 billion in loan from a group of institutional lenders led by Standard Chartered Bank to help finance its US$446 million capacity expansion plan.
"GrameenPhone (GP) is set to clinch a deal with Standard Chartered Bank (SCB) to secure Tk 2.0 billion in syndicated loan from the originally arranged loan of Tk 3.95 billion," a well-placed source said.
"SCB originally arranged US$320 million syndicated loan from a number of global lenders for GP to fund the company's proposed network expansion investment. But GP had to discard the plan to avail foreign credit, due mainly to the stringent rules of the Bangladesh Bank," the source added.
GP officials confirmed Sunday the company's push for obtaining the syndicated loan, almost half the original local currency segment of Tk 3.95 billion, but declined to be quoted for this story.
"If everything goes well, the loan agreement will be signed next week," another source said.
The sources noted that although GP abandoned its plan to get foreign loan and scaled down the local currency credit needs, it would bear most of the expenditure from the company coffers.
"The planned capacity expansion investment will be financed through GP's own cash flow, while the gap financing will be bridged through drawing local syndicated long-term loan arrangement to the tune of Tk 2.0 billion," a company source said.
GP's robust revenues illustrate the fact that the company is well-placed to go for even multi-million-dollar investments needed to withstand competition from the existing players.
GP, the market leader with a 60 per cent share in the fiercely competitive mobile phone sector, churned out revenues worth $657 million in 2006, up from $388 million in 2005, according to figures available with GP.
An estimated 31 million people use mobile phones, of which the number of GP's subscribers is more than 14 million, making it the country's largest mobile phone operator.
GP insiders insist the company is pledge-bound to put money into network expansion from its own source, no matter whether it can access to external financing.
GP met the financing requirements for expanding its capacity in 2005 and in 2006 from its own coffer, they say.
GP's cash flow situation seems to have improved due to exponential revenue growth, underpinned by strong and burgeoning subscribers' base.
In 2005, GP finalised a financing package for US$320 million through Standard Chartered Bank that also included a local currency syndicated tranche of Tk395 billion. EKN Guaranteed Facility, the International Finance Corporation and Norfund agreed to co-finance the proposed foreign currency component of the syndicated lending.
The loan package was approved by Board of Investment and Bangladesh Bank in October 2006 and re-approved in January 2007.
At 14 per cent tele-density, the country's mobile phone market is growing at a faster pace.
Studies say the number of cell phone users will hit the 50-million mark by 2009 before being slowed down in 2010.
Telecom analysts say, the recent growth in Bangladesh's mobile market can be attributed to factors such as the deregulation of the telecommunication sector, low levels of tele-density and inadequate fixed phone infrastructure.
Also, they point out, the massive foreign direct investment by telecom giants such as Telenor, Telekom Malaysia, Orascom, SingTel, and UAE-based Warid Telecom have stimulated competition, leading to price war.