Smart inks $195-M loan for expansion of its GSM network

Smart Communications Inc. has signed a $195-million (P9.75 billion) multi-tranche loan facility with various financial institutions, the proceeds of which will be used to finance phase five of Smart’s GSM network expansion.

The agreements were signed last Friday, with Smart president and CEO Napoleon L. Nazareno signing in behalf of the company.

Despite the uncertainties prevailing in the market at the time of the offer, the syndication was well-received and fully subscribed. Smart’s strong financial performance in the first quarter of 2001, where it posted a net income of P837 million, helped elicit strong interest in the issue with nine international banks joining the syndication. Citibank NA, Citicorp International Limited and ING Barings were the mandated arrangers for the transaction.

The facility is composed of three tranches: a $30-million direct loan from the Nordic Investment Bank (a multilateral lending agency); $15-million direct loan from the Netherlands Development Finance Co., and $150-million syndicated loan which is supported by a guarantee from the export credit agency of Finland, Finnvera plc, for 95-percent political and 50-percent commercial risk-cover.

The loans have similar repayment periods of five years, with grace periods ranging from nine to 18 months. The first two tranches carry an interest rate of 325 basis points over the benchmark London Interbank Offered Rate (LIBOR) while the third tranche carries an interest rate of 142.5 basis points over LIBOR. With six-month LIBOR currently below four percent per annum, Smart achieved very competitive funding.

Smart is the leading wireless operator in the Philippines with approximately 3.5 million subscribers as of end-March 2001. It operates an extensive GSM network with a capacity for over five million subscribers, with 1,545-base stations covering nearly 600 cities and municipalities.

Anticipating further subscriber growth, Smart has increased the switch capacity of its GSM cellular network by 40 percent in the first four months of this year to 5.6 million subscribers as part of its P21-billion network expansion program for 2001.

The country’s largest cellular phone company has also boosted the capacity of its text messaging system by about 63 percent – to 140 million messages a day on the "in-out" basis.

To handle the increasing voice traffic, Smart has added five GSM switches so far this year. It has also accelerated its base station roll-out and transceiver expansion programs resulting in a 41-percent growth in transceiver count. Around 220 new base stations have also been added, making for a total of approximately 1,600.

To handle the rising number of text messages, Smart has added high capacity short messaging system "boxes" that can process on an "in and out" basis as much as 140 million messages a day, 63 percent higher compared to the 2000 year-end figure of 86 million messages processing capacity.

Aside from the usual outdoor base stations for wide area coverage, Smart has been installing indoor base stations, one of them the Nokia’s InSite, the smallest but powerful indoor base station in the market. This easy-to-install base station is being used to provide cellular coverage for indoor-areas such as hotels, conference rooms and buildings.

Smart has also been installing UltraSites, the new GSM bave station equipment from Nokia that substantially increases the capacity of its digital mobile phone network and also make it easier to install a third-generation (3G) system in the future.

The company also installed recently Nokia’s Metrosites, pole mounted micro base stations for street level coverage and to address "hot spot" areas. These powerful outdoor equipment houses four transceivers and has a large expansion capability supporting Smart’s dual band GSM 900/1800 operations.

Smart’s expanded network is now capable of providing general packet radio system (GPRS) services, the first mobile phone 2.5 platform commercially launched in the Philippines that enables operators to offer "always-online" Internet services on cellular phones.