Dubai: Emirates Integrated Telecommunications Company, or du, has entered into a $255 million (Dh936.3 million) medium-term loan facility with the Export-Import Bank of China, the telecom operator announced yesterday.
"This agreement is part of our carefully executed plan enabling us to finalise the initial groundwork of our financing strategy, putting du in a very strong position moving forward," said chief executive Othman Sultan.
One analyst put the cost of the loan at Libor plus 1.92. "This is a very good cost-to-funds rate," said Irfan Ellam, vice-president of equity reseach at Al Mal Capital.
Nearly $85 million of the funds will be used to repay an existing short-term facility while the rest will be used to purchase equipment to further the expansion of du's 3G network, the company said in a statement.
The loan was backed by the Chinese export credit agency Sinosure.
Following recent business deliberations between the UAE and China, the flourishing economy of China presents a prime market for regional telecom operators, while lenders stand to benefit from the solid performance and growth prospects of these companies.
Ellam said the Chinese government is probably helping equipment suppliers with competitive financing deals to boost its telecom equipment industry.
The three-year short-term facility of $85 million will be converted to a seven-year facility on a two-year drawdown and a five-year repayment plan.
Last month, du signed a $207-million export credit facility with German bank group KfW Ipex-Bank, and earlier this year it raised Dh1 billion in capital through a rights issue that got a positive response from investors and was backed by a promise of subscription from major shareholders
"I expect to see some more financing deals as the company moves to having an optimal capital structure. They have $3 billion debt on the balance sheet due next summer. The final part of the jigsaw puzzle will be refinancing this long-term loan," Ellam said.
The mobile market remains the major revenue generator for du, requiring infrastructure investment as customers demand service improvements.
