MTN pours $2bn into Nigeria

By Damaria Senne, ITWeb senior journalist

Johannesburg, 04 Oct 2007

The MTN Group has arranged a $2 billion loan to fund the network expansion of its Nigeria operations. It says this allows it to aggressively penetrate that country's telecommunications market and improve its quality of service.

Arranged by South African banking giant Standard Bank, the five-year medium-term debt facility is said to be one of the largest telecoms deals on the African continent, MTN says in a media statement.

The group initially planned to raise $1.2 billion, split into the naira equivalent of $840 million in local currency facilities and $360 million in foreign currency facilities.

However, potential investors, particularly Nigerian commercial banks, were so keen that the syndication was 200% oversubscribed.

Consequently, MTN raised $2 billion, split into the naira equivalent of $1.6 billion and a $400 million foreign currency facility.

Critical mass

While MTN does not specify the size of its planned fibre optic transmission network, it says the network "spans the length and breadth of the country".

The group has already invested $3.1 billion in building its Nigerian mobile telecoms network, which covers 99.7 million people and more than 561 069 square kilometres.

MTN Group CEO Phuthuma Nhleko says the network will give MTN Nigeria a competitive advantage and ensure it meets the increasing demand for its services.

"I think it's aggressive rather than defensive and speaks of an engulf-and-devour strategy rather than the need to stave off inroads into their turf. Nigeria is giving MTN the critical mass to steamroller the entire continent," says MarketWorks business advisor Steve Edwards.

Edwards argues that, given MTN's performance across sub-Saharan Africa over the past half decade, the competition will not be a problem. "For another thing, MTN's strategy goes beyond cell telephony to full ICT data networking/broadcasting convergence. The demands of that service load will require a significant fibre infrastructure across their sphere of operations, which is pretty much most of Africa now."

MTN says it has 14 million subscribers in Nigeria, making up a 44% share of that market. The group expects the Nigerian market to grow to 52 million subscribers by 2011.

Boosting growth

Frost & Sullivan ICT industry analyst Lindsey McDonald says MTN's move is logical, as existing capital was used for the roll-out of essential network infrastructure.

"This boost to the company's coffers will ensure it is able to make the necessary investment to continue to grow its market share within Nigeria and consolidate its dominant position within this market."

It is also expected to help improve the quality of service in that country. This issue recently led the Nigerian Communications Commission to call on operators to cease advertising their services until such time as quality issues are resolved, says McDonald.

MTN says Standard Bank has been involved in its expansion in Nigeria. It assisted in arranging a $450 million syndicated loan for MTN, which was partially used to fund the original licence payment when MTN entered the Nigerian market in 2001.

Standard Bank also arranged MTN Nigeria's naira bridging finance facility in 2002, co-arranged a $395 million loan in 2003 and raised a further $200 million for the company. In 2006, it assisted with restructuring MTN Nigeria's funding arrangements.