MTS raising €218m loan with €103m to be syndicated to commercial banks

The European Bank for Reconstruction and Development is raising a total of €218 million for Russia’s MTS mobile operator, including €103 million to be committed by commercial banks, in a transaction demonstrating how syndicated loans for top-rated Russian corporate borrowers can still be successful despite the world financial crisis. The loan will support MTS expansion and the pilot deployment of new technologies that reduce energy consumption of base stations, incorporate renewable energy sources, and reduce the carbon footprint of telecommunications.
MTS, which is listed on the NYSE, is majority-owned by JSFC Sistema, one of the largest private sector conglomerates in Russia and the CIS.

EBRD has provided €115 million in financing, which was signed 23 December 2008, and will remain the lender of record for the full amount of €218, the remainder of which will be provided by commercial banks.

The EBRD lending is being made in conjunction with the Nordic Investment Bank (NIB), which is providing a €40 million seven-year A loan to MTS and syndicating a further €40 million B loan with a three-year maturity. The European Investment Bankis also providing €115 million loan for MTS. The volume and terms of these loans underline these institutions’ commitment to mobilising commercial bank co-financing despite volatile market conditions.

This IFI funding, totalling €413 million in all, is earmarked to finance the rollout of Russian mobile operator MTS’s 3G network in Russia and an upgrade of its systems in Turkmenistan and Uzbekistan.

A separate €10 million portion of the EBRD’s own €115 million A loan to MTS will fund the telecoms industry’s first trial of a programme to cut the operator’s carbon footprint through the use of renewable energy to power 20 base stations in rural areas of central Russia. If successful, this could bring mobile telephony to isolated communities now beyond the reach of electrical grids.

The trial will use to power 3G/GSM/Wimax base stations in rural areas. In addition, new technologies and designs will be employed to minimize power consumption of base stations which could cut energy use by up to 46 percent.
The cost of powering base stations is the key factor limiting the deployment of mobile communications in remote areas. The information and communications technology industry accounts for four percent of global C02 emissions, more than airlines. The use of alternative energy generation and more efficient base station design would help reduce that carbon footprint.