Cell C raises $530m through Citigroup

Published Jun 24, 2003


Johannesburg - Cell C had raised $530 million (about R4.2 billion) to expand its network through a project finance deal arranged by US-based investment bank Citigroup, Paul Doany, a director of the mobile operator, said yesterday.

Included in the deal was a $100 million facility for Cell C's black empowerment partner, CellSAf, making it one of the largest empowerment funding deals in the telecoms sector, Doany said.

Cell C is wholly owned by 3C Telecommunications, which is 60 percent owned by Oger Telecom South Africa, a division of Saudi Oger, and 40 percent by CellSAf.

The facility will be used by CellSAf to pay for its equity which, Doany said, was in excess of government's requirement of 30 percent black economic empowerment for the telecoms sector.

Cell C has 1.4 million active subscribers since its official launch in November 2001, 1 400 staff and 6 500 distribution points.

The funds would be used to roll out the network, meet its working capital and capital expenditure needs, and cover the costs of acquiring new subscribers, Doany said.

Sebastian Paredes, the chief executive of Citigroup in sub-Saharan Africa, said the money was raised through a mix of equity and debt.

"This is a landmark transaction for South Africa both in terms of its size and participation. The fact that the deal was successfully completed at a time when global markets were slow, provides evidence of the strength of the project and the South African borrowers." he said.

It included a nine-year senior debt facility of $252 million (one of the longest terms yet achieved in the region), a $178 million subordinated facility and the $100 million facility for CellSAf.

The financing included $165 million in export credit agency facilities from foreign trade insurance funds Hermes of Germany and Sace of Italy, which meant it was the first project finance deal in South Africa to carry commercial and political risk cover from both agencies, Paredes said.

"A further $50 million was provided by the Development Bank of Southern Africa and the Industrial Development Corporation, marking the first time these two governmental agencies have jointly supported a telecoms transaction in sub-Saharan Africa," Paredes said.

The financing was supported by Siemens and was partially used to redeem an existing dual currency bridging advance of $270 million the firm had made to Cell C. Nine institutions participated in the financing of the Cell C deal, including local players Absa, Investec and Nedbank.

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