Banglalink has sealed deals with subscribers to borrow Tk 707 crore through bonds to expand its network in the near-untapped rural telecom market.
The figure is an increase from its initial bid for Tk 425 crore.
Banglalink, the subsidiary of Egypt-based Orascom Telecom Holdings (OTH) in Bangladesh, revised the figure up, inspired by over-subscription of its bond offer by private placement.
A bond is a debt instrument. A stock investor takes ownership in the company in which he is investing, but a bond does not represent ownership.
Banglalink received subscriptions worth Tk 900 crore from investors. Some 26 institutional investors, such as banks and non-bank financial institutions, insurance companies, corporate houses and mutual funds, subscribed to the Banglalink bonds. Participants termed the offering the largest bond offer in the telecom sector from the domestic market.
Banglalink is offering 13.5 percent interest a year for its five-year senior secured bond of Tk 1 crore each, which is proposed to be redeemed by 2014. The existing average interest rate in Bangladesh is Tk 13 a year.
The Securities and Exchange Commission (SEC) approved Bangalink's upward revision of the debt amount after the mobile operator said its offer was oversubscribed.
"We received an overwhelming response to our bond offering from local investors. Investors have shown solid confidence in Banglalink. Their initial submission was for Tk 9 billion (Tk 900 crore) against our offer of Tk 4.25 billion (Tk 425 crore)," Ahmed Abou Doma, chief executive officer and managing director of Banglalink, told The Daily Star yesterday.
"Banglalink decided to upsize the bond amount to focus on the financial plan of the company. The additional money will offset other sources of foreign lending as planned earlier, which complies with the requirements of BoI, to concentrate on local funding rather than foreign."
The amount will mainly be spent on network expansion to the deep rural areas and improve service quality.
Citibank NA is acting as the lead arranger and placement agent for the bond offer.
“We consider that subscribing to the Banglalink bond will be financially viable. Its huge demand in the private sector has given us confidence that we will be able to dispose of the bonds easily in times of our need,” said Yawer Sayeed, chief executive of AIMS of Bangladesh, an asset management firm.
In the first nine months of 2009, the operator registered 25 percent growth in revenue to over $259 million (Tk 1,796.186 crore) from a year ago. In the same period, Banglalink achieved EBITDA (earnings before interest, taxes, depreciation and amortisation) of $95 million (Tk 658 crore) because of a decrease in customer acquisition and interconnection cost, coupled with an increase in revenue, according to the company.
The cell phone operator invested a total of Tk 7,974 crore until the end of 2009 in Bangladesh.
The EBITDA margin for the third quarter of 2009 remained steady at 40 percent, allowing for an increase in margin for the nine months of 2009 to 37 percent from a negative margin of 4 percent in the same period of 2008.
Aggressive marketing made Banglalink the market's second largest operator at the end of 2007, after overtaking Aktel in terms of subscriber acquisition. As of September 2009, Banglalink had a 24.2 percent share in the six-operator mobile market.
Source: thedailystar.net
