Kazakh Telecoms Leader Wins $110 Million Eyeing Market Reform

Largest telecommunications operator in Central Asia Kazakhtelecom (KTC) will be lent $110 million by a consortium of international banks led by the European Bank for Reconstruction and Development (EBRD)
Funds will help the company restructure its debts and modernize the network pending market liberalization planned by the government.

The loan comes at an important time for Kazakhtelecom, national operator and main provider of fixed lines. The government is committed to begin liberalizing the country's telecommunications market in 2004, said Izzet Guney, director of the EBRD sector team.

Access the Kazakh operator gained to international capital markets through this transaction would help optimize funding costs and invest in developing its network, he said. These were two key targets ahead of planned privatization. Currently, the Kazakh government has a stake of 50 percent plus one share in the company.

New finance is a major expansion of a $50 million EBRD loan to KTC in 1999 and marks the first time a loan to the Kazakh telecommunications sector has been syndicated. Finance was arranged jointly by the EBRD and Standard Bank London.

EBRD is lender of record for the full amount, providing $60 million of its own funds with a seven-year maturity. The remaining $50 million is being syndicated to five commercial banks, advancing five-year funds.

Standard Bank London, the joint mandated arranger, is underwriting the syndicated portion of the loan and taking $9 million onto its own books. Raiffeisen Zentralbank Цsterreich (RZB) and Citibank are acting as arrangers and taking, respectively, $18 million and $14 million. Credit Lyonnais and WestLB AG are acting as co-arrangers and taking $4.5 million each.

London syndications head with Standard Adrian Walker said the deal signalled opening up of the medium to long-term international credit markets to top-tier Kazakh corporates.

In efforts to help the Kazakh government promote a transparent regulatory framework for the sector, EBRD legal experts have been providing technical assistance to the authorities. The governments of Japan and Taipei China have each contributed Ђ200,000 in donor funding for the program and Ђ364,000 has come from the European Union.

Michael Stedman