Summary of Proposed Investment
Project Number
10454
Company Name
Telefonica Celular de Bolivia S.A.
Date SPI Disclosed
Aug 29, 2000
Country
Bolivia
Industry
Telecommunications and Technology
Projected Board Date
Oct 1, 2000
Status
Completed
Sector
Mobile Telephony
Department
TMT, Venture Capital & Funds
Environmental Category
C - No Impact
Previous Events
Approved : Dec 4, 2000
Signed : Jun 1, 2001
Invested : Jul 16, 2001
Project Description
Telecel launched its analog cellular services in November 1991 as the first cellular operator in Bolivia. In 1996, IFC arranged a debt investment of US$35 million to help finance a US$65.1 million capital expenditure program for Telecel to expand its mobile cellular network (IFC/R96-155). The implementation of that project is ahead of schedule and the subscriber growth exceeds IFC''s projections. However, a competing operator launched cellular services in 1997, and both the magnitude of competition and the pace of the shift from post-paid to prepaid subscribers were underestimated. Competition led to lower tariffs, and the surge in prepaid subscribers caused some network congestion, which, in turn, led to prepaid subscribers crowding out higher value post-paid subscribers. As a result, many post-paid subscribers left Telecel for the competitor, whose network is largely digitized. In addition, in 1999 the company still had a cost structure designed for a different customer base. In late 1999, the company began to address these issues, bringing in a new management team, reducing operating costs significantly, and digitizing some of the network, beginning in the urban areas. Thus, the purpose of the project is to help (1) finance the expansion and continuing digitization of Telecel cellular network in order to meet competition, and (2) to improve the company''s debt profile by extending/restructuring existing debt, allowing the company to focus on needed capital expenditures rather than debt repayments in the next 2 years.
IFC''s financing would replace existing debt that comes due in the next 1-2 years with long-term finance, more appropriate for an established cellular company that is experiencing high growth. The longer maturities and grace period will give Telecel an opportunity to expand and digitize its network. In addition, IFC would be playing a catalytic role, encouraging investments from other financial institutions that would be unlikely to invest without IFC''s involvement. Moreover, IFC''s investment would demonstrate its continued support for the development of Bolivia''s private sector, promoting sustainable development through growth of established private companies.
This project would improve communications in Bolivia, increasing efficiency in the business community and better connecting Bolivia to the global economy. Improved telecommunications would likely encourage investments in other sectors, thereby promoting economic growth. Moreover, this project would actively promote competition, allowing Telecel to keep pace with its competitor, thereby helping to lower telecommunications tariffs and making cellular communications more accessible to larger segments of the population. The proposed new expansion is also likely to create additional jobs during the construction of the network.
IFC''s financing would replace existing debt that comes due in the next 1-2 years with long-term finance, more appropriate for an established cellular company that is experiencing high growth. The longer maturities and grace period will give Telecel an opportunity to expand and digitize its network. In addition, IFC would be playing a catalytic role, encouraging investments from other financial institutions that would be unlikely to invest without IFC''s involvement. Moreover, IFC''s investment would demonstrate its continued support for the development of Bolivia''s private sector, promoting sustainable development through growth of established private companies.
This project would improve communications in Bolivia, increasing efficiency in the business community and better connecting Bolivia to the global economy. Improved telecommunications would likely encourage investments in other sectors, thereby promoting economic growth. Moreover, this project would actively promote competition, allowing Telecel to keep pace with its competitor, thereby helping to lower telecommunications tariffs and making cellular communications more accessible to larger segments of the population. The proposed new expansion is also likely to create additional jobs during the construction of the network.
Sponsor / Cost / Location
Development Impact
Related ESRS/ERS
Contacts
For Inquiries About the Project, Contact
pleahy@ifc.org