Chad-2010-Financing the expansion and intensification of a mobile phone network

Financing the expansion and intensification of a mobile phone network in Chad

 

Start-up: 2010
Financing: FCFA 8bn senior loan
Partner: Millicom Chad
 
Context
 
The telecommunications sector in Chad is one of the fastest growing in Africa. While fixed telephony is virtually non-existent, the demand for mobile phones is high (21% in 2009, which represents approximately 2.2 million subscribers) and should continue to increase in coming years (50% in 2014). This reflects first the strong appeal of GSM solutions, then the poor road network which hinders mobility and finally the very accessible price for a growing part of the population.
 
The Millicom International Cellular Group is one of the main companies involved in emerging markets telecoms. Millicom is mainly a "low-cost” provider of prepaid cards and focuses its activities on areas where most other telecommunication services are inefficient. The Group has subsidiaries in 14 countries in Africa, Asia and Latin America, providing its services to more than 35 million subscribers. Millicom Chad is now the leader in its market.
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Objectives
 
PROPARCO’s financing for Millicom Chad aims to support the extension and intensification of its existing network, to manage the growing number of subscribers and provide access to mobile telecommunication services to a larger customer base.

PROPARCO’s investment is fully integrated to the West Africa development strategy, especially considering the local currency loan.
Project description
 
PROPARCO alongside the IFC, has granted a credit line of FCFA 8bn to finance the expansion and strengthen the infrastructure network of Millicom Chad.
 
Depending on the growth of subscribers, Millicom plans to extend its high quality network, undisrupted, with a strong rural focus (188 additional sites by the end of 2011, 481 sites in total).
 

The Banque internationale du Cameroun pour l’épargne et le credit (a subsidiary of the French Banque Populaire Group) will participate (own risks) trough a direct loan of FCFA 2 bn out of the 8 bn arranged by PROPARCO.

Local currency funding, the first of its kind for PROPARCO in the CFA zone, reduces the risk of exchange for Millicom.
 
 
Impacts

First telecom operator in Chad, Millicom plays a crucial role in infrastructures development and supply of telecommunications services.

The planned investments will contribute to improve coverage through grid extension and improve quality of provided services.

Like other PROPARCO’s telecom operations (including Millicom Laos, Ghana and Tanzania), the project will directly contribute to the growth of Chad' economy especially through:
· Investments,
· Tax contributions,
· Employment of local and expatriate staff (Millicom Chad currently employs 330 people full time and about 8 000 indirect jobs are created through the stalls of resales of cards).
This project also contributes to financial innovation in West Africa, as this operation is the first FCFA loan for PROPARCO (and AFD) in the area. It notably helps Millicom Chad avoid foreign exchange risks.

>> Download the press release