Table of Contents for Telecoms in Project Financing
TABLE OF CONTENTS
1. Introduction
1.1 Telecoms and finance
1.2 Focus of report
2. What is project finance?
2.1 Introduction
2.2 What is telecommunications?
2.3 What is a project?
2.4 What is project finance?
Table 1: Project finance sectors
2.5 When is project finance used?
Chart 1: Total global project finance across the spectrum of industry from 1997 to 2002 ($)
2.5.1 Project finance according to year
2.5.1.1 Project finance in 1996
2.5.1.2 Project finance in 1997, 1998, 1999
2.5.1.3 Project finance in 2000
2.5.1.4 Project finance in 2001
2.5.2 Project finance according to industry
2.5.2.1 Power and infrastructure
2.5.2.2 Oil and gas, leisure and petro chemicals
2.5.2.3 Telecoms
2.6 Who are the project participants?
Diagram 1: Project finance players
2.6.1 Special purpose vehicle (SPV)
2.6.1.1 Corporation
2.6.1.1.1 Advantages of the corporate form
2.6.1.1.2 Disadvantages of the corporate form
2.6.1.2 Limited liability company
2.6.1.3 General partnership
2.6.1.4 Limited partnership
2.6.2 Concession authority
2.6.3 The sponsors
2.6.4 The funders/lenders
2.6.5 Multilateral and export credit agencies
2.6.6 The contractual agreement
2.6.7 Project finance participants - exemplified
2.6.7.1 H3G Italia
2.6.7.2 Jupiter Telecommunications Co (J-Com Broadband)
2.6.7.3 Optimus
2.7 Project finance as a limited and non recourse financing structure
Diagram 2: Recourse variations
2.8 Chapter conclusion
3. The benefits of project finance
3.1 Introduction
3.2 Off balance sheet implications
3.3 Transfer of risk and limited/non recourse to the sponsor
3.4 Opportunity to pursue additional or alternative projects
3.4.1 Using project finance to explore other lines of business - Williams Communications
3.4.2 Tax vehicle
3.5 Encourages careful project evaluation and risk assessment
3.6 Chapter conclusion
4. Drawbacks of project financing
4.1 Introduction
4.2 Off-balance sheet fraud and abuse
4.3 Time consumption and expense
4.4 Potential treatment of sponsor and SPV as a single entity
4.4.1 Introduction
4.4.2 When does a subsidiary relationship exist?
4.4.2.1 UK law
4.4.2.2 US law
4.4.2.3 Canadian law
4.4.2.4 German law
4.4.2.5 Regimes consolidated
4.4.3 Legal effect of sponsor/SPV relationship
4.4.3.1 UK law
4.4.3.2 US and Canadian law
4.4.3.3 German law
4.4.3.4 Legal regimes consolidated
4.4.4 Conclusion
4.5 Chapter conclusion
5. Project finance risks and risk management
5.1 Introduction
5.2 Risk minimisation process
5.2.1 Step 1- Risk identification and analysis
5.2.2 Step 2 - Risk allocation
5.2.3 Step 3 - Risk management
5.3 Types of risks
5.3.1 Construction phase risk - Completion risk
5.3.2 Operation phase risk
5.3.2.1 Resource / reserve risk
5.3.2.2 Operating risk
5.3.2.3 Market / off-take risk
5.3.3 Risks common to both construction and operational phases
5.3.3.1 Participant / credit risk
5.3.3.2 Technical risk
5.3.3.3 Currency risk
5.3.3.4 Regulatory / approvals risk
5.3.3.5 Political risk
5.3.3.5.1 Telecoms and political risk in the Middle East
5.3.3.5.2 Telecoms and political risk in China
5.4 Chapter conclusion
6. Sources of project funding and sources of project finance
6.1 Introduction
Diagram 3: Classification of financial instruments
6.2 Equity funding
6.2.1 Equity as a source of project finance
6.2.1.1 Equity as a source of project finance - the drawbacks
6.2.1.1.1 Lowest ranking form of capital
6.2.1.1.2 Limitation on dividends
6.2.1.1.3 Increased risks
6.2.1.1.4 Not all equity is created equal
6.2.1.1.5 Overstating costs
6.2.1.1.6 Project economics
6.2.1.1.7 Higher equity, higher dividends, higher costs
6.2.1.1.8 Country risk
6.2.1.1.9 Government and legal requirements
6.3 Debt funding
6.3.1 Introduction
6.3.2 Conventional bank loans
6.3.2.1 Special purpose vehicle (SPV)
Diagram 4: Conventional debt financing vs project financing 1
Diagram 5: Conventional debt financing vs project financing 2
6.3.2.2 Security arrangements and recourse
Diagram 2: Recourse variations
6.3.2.2.1 Hybrid limited recourse financing
6.3.2.2.1.1 Hybrid financing and project financing
6.3.2.2.1.2 Hybrid financing and corporate financing
6.3.2.2.1.3 Hybrid financing
6.3.2.3 Time and Cost
6.3.3 Conventional bond financing
6.3.3.1 Bonds vs loan facilities
6.3.3.2 Conventional bond financing vs project financing
6.3.4 Corporate finance and bonds within project finance
Chart 3: Global project-financed investment 1994- 2001 (in US $billions)
Chart 4: Number of projects financed according to project-financed debt
Chart 5: Percentage project finance lending according to debt
6.3.4.1 Commercial lending and project finance
6.3.4.2 Bond financing and project finance
6.3.4.2.1 Advantages of bonds in project finance
6.3.4.2.2 Disadvantages of bonds in project finance
6.3.4.2.3 The future of the bond market in project finance
6.3.4.3 Commercial debt vs bond issues in project finance
6.3.4.3.1 Advantages of commercial debt
6.3.4.3.2 Disadvantages of commercial debt
6.4 Chapter conclusion
7. Global behaviour in telecoms
7.1 Introduction
7.2 Global mobile subscriptions
Table 2: Global breakdown of wireless subscriptions (in € millions)
Chart 6: Global breakdown of wireless subscriptions for other digital technologies (in €millions)
Chart 7: Global breakdown of total GSM subscribers (in millions)
Chart 8: Global breakdown of total analogue subscribers (in millions)
Chart 9: Global breakdown of total subscriptions for other digital technologies, total GSM
subscriptions and total analogue subscriptions (in millions)
Chart 10: Global breakdown of total wireless subscriptions in millions
Table 3: Regional breakdown of wireless subscriptions*
Chart 11: Forecasted global breakdown of wireless subscriptions from 2002 to 2008*
Chart 12: Forecasted breakdown of wireless subscriptions in Asia from 2002 to 2008*
Chart 13: Forecasted breakdown of wireless subscriptions in Western Europe from 2002 to 2008*
Chart 14: Forecasted breakdown of wireless subscriptions in North America from 2002 to 2008*
Chart 15: Forecasted breakdown of wireless subscriptions in Eastern Europe from 2002 to 2008*
Chart 16: Forecasted breakdown of wireless subscriptions in Latin America from 2002 to 2008*
Chart 17: Forecasted breakdown of wireless subscriptions in Africa from 2002 to 2008*
Chart 18: Forecasted breakdown of wireless subscriptions in Middle East from 2002 to 2008*
7.3 British Telecom and 3-G licensing spending
Table 4: British Telecom's expenditure on 3-G licenses
7.3.1 The decline in BT's share price
Chart 19: Percentage and volume share price of BT compared to the rest of the telecoms industry between 1999 and 2003
7.3.2 BT's approach to debt management
7.3.3 Visiongain analysis
7.4 Global project financing in telecoms
Table 5: Total project finance loans for telecoms projects by region 1997 - 2002**
Chart 20: Total project finance loans for telecoms projects by region 1997 - 2002**
Chart 21: Total global project finance loans for telecoms projects from 1997 - 2002**
7.4.1 Annual fluctuations
7.4.1.1 Global telecom financing trends - 1997
Chart 22: Global project financing in 1997, deconstructed according to region**
Table 6: Regional project financing and corporate financing in telecoms in 1997**
Chart 23: Regional project financing and corporate financing in telecoms in 1997**
Table 7: Regional project finance, corporate finance and bond investment in telecoms in1997**
Chart 24: Regional project finance, corporate finance and bond investment in telecoms in1997**
Chart 25: Total global project finance, corporate finance and bond investment in telecoms in 1997**
7.4.1.1.1 Visiongain analysis
Chart 1: Total global project finance across the spectrum of industry from 1997 - 2002**
7.4.1.2 Global telecom financing trends - 1998
Chart 26: Global project financing in 1998, deconstructed according to region**
Table 8: Regional project financing and corporate financing in telecoms in 1998**
Chart 27: Regional project financing and corporate financing in telecoms in 1998**
Table 9: Regional project finance, corporate finance and bond investment in telecoms in 1998**
Chart 28: Regional project finance, corporate finance and bond investment in telecoms in 1998**
Chart 29: Total global project finance, corporate finance and bond investment in telecoms in 1998**
7.4.1.2.1 Visiongain analysis
Chart 30: Total global project finance in telecoms in 1997 and 1998**
7.4.1.3 Global telecom financing trends - 1999
Chart 31: Global project financing in 1999, deconstructed according to region**
Table 10: Regional project financing and corporate financing in telecoms in 1999**
Chart 32: Regional project financing and corporate financing in telecoms in 1999**
Table 11: Regional project finance, corporate finance and bond investment in telecoms in 1999**
Chart 33: Regional project finance, corporate finance and bond investment in telecoms in 1999**
Chart 34: Total global project finance, corporate finance and bond investment in telecoms in 1999**
7.4.1.3.1 Visiongain analysis
Chart 35: Total global project finance in telecoms in 1997, 1998 and 1999**
7.4.1.4 Global telecom financing trends - 2000
Chart 36: Global project financing in 2000, deconstructed according to region**
Table 12: Regional project financing and corporate financing in telecoms in 2000**
Chart 37: Regional project financing and corporate financing in telecoms in 2000**
Table 13: Regional project finance, corporate finance and bond investment in telecoms in 2000**
Chart 38: Regional project finance, corporate finance and bond investment in telecoms in 2000**
Chart 39: Total global project finance, corporate finance and bond investment in telecoms in 2000**
7.4.1.4.1 Visiongain analysis
7.4.1.5 Global telecom financing trends - 2001
Chart 40: Global project financing in 2001, deconstructed according to region**
Table 14: Regional financing in telecoms in 2001**
Chart 41: Regional project financing and corporate financing in telecoms in 2001**
Table 15: Regional project finance, corporate finance and bond investment in telecoms in 2001**
Chart 42: Regional project finance, corporate finance and bond investment in telecoms in 2001**
Chart 43: Total global project finance, corporate finance and bond investment in telecoms in 2001**
7.4.1.5.1 Visiongain analysis
7.4.1.6 Global telecom financing trends - 2002
Chart 44: Global project financing in 2002, deconstructed according to region**
Table 16: Regional project financing and corporate financing in telecoms in 2002**
Chart 45: Regional project financing and corporate financing in telecoms in 2002**
Table 17: Regional project finance, corporate finance and bond investment in telecoms in 2002**
Chart 46: Regional project finance, corporate finance and bond investment in telecoms in 2002**
Chart 47: Total global project finance, corporate finance and bond investment in telecoms in 2002**
7.4.1.6.1 Visiongain analysis
7.4.2 Regional fluctuations
7.4.2.1 Telecom financing in Western Europe
Chart 48: Total project financing and corporate financing in Western Europe telecoms from 1997 to 2002**
7.4.2.2 Telecom financing in Eastern Europe and the FSU
Chart 49: Total project financing and corporate financing in Eastern Europe and the FSU telecoms, from 1997 to 2002**
7.4.2.3 Telecom financing in the Middle East
Chart 50: Total project financing and corporate financing in Middle East telecoms, from 1997 to
2002**
7.4.2.4 Telecom financing in Africa
Chart 51:Total project financing and corporate financing in Africa telecoms, from 1997 to 2002**
7.4.2.5 Telecom financing in the Indian subcontinent
Chart 52:Total project financing and corporate financing in the Indian Subcontinent telecoms market, from 1997 to 2002**
7.4.2.6 Telecom financing in EMEA
Chart 53:Total project financing, corporate financing and bond financing within the EMEA, from 1997 to 2002**
7.4.2.7 Telecom financing in South East Asia
Chart 54:Total project financing and corporate financing within South East Asia, from 1997 to 2002**
7.4.2.8 Telecom financing in Australia and the Pacific
Chart 55:Total project financing and corporate financing in Australia and the Pacific from 1997 to 2002**
7.4.2.9 Telecom financing in the Asia Pacific
Chart 56:Total project financing, corporate financing and bond financing within Asia/Pacific, from 1997 to 2002**
7.4.2.10 Telecom financing in North America
Chart 57:Total project financing and corporate financing in North America, from 1997 to 2002**
7.4.2.11 Telecom financing in Latin America & Caribbean
Chart 58:Total project financing and corporate financing in Latin America & Caribbean, from 1997 to 2002**
7.4.2.12 Telecom financing in the Americas
Chart 59:Total project financing, corporate financing and bond financing within the Americas, from 1997 to 2002**
7.4.3 Forecast fluctuations
Table 18: Total project finance loans for telecoms projects by region 2003 to 2009**
Chart 60: Total project finance loans for telecoms projects by region 2003 to 2009**
Chart 61: Total global project finance loans for telecoms projects from 2003 to 2009**
7.4.3.1 Visiongain analysis
7.4.3.1.1 Project financing activity in 2003
Chart 62: Total global project finance loans for telecoms projects in 2003**
7.4.3.1.1.1 North America
7.4.3.1.1.2 Eastern Europe
7.4.3.1.1.3 Africa
7.4.3.1.1.4 Latin America
7.4.3.1.1.5 Australia and Pacific
7.4.3.1.2 Project financing activity in 2004
Chart 63: Total global project finance loans for telecoms projects in 2004**
7.4.3.1.2.1 North America
7.4.3.1.2.2 Latin America
7.4.3.1.2.3 Eastern Europe
7.4.3.1.2.4 Asia Pacific
7.4.1.3 2005 to 2009
7.5 Chapter conclusion
8. 3-G project financing - case studies
8.1 Introduction
Diagram 7: Market share data for selected European mobile markets
Table 19: UMTS project financings
Table 20: Global top ten telecom project finance deals 2001
Table 21: Global top ten project finance telecom deals 2002
8.2 The difficulties in structuring 3-G deals
8.2.1 WAP disaster
8.2.2 GPRS failure
8.2.3 2-G
8.3 Case studies
8.3.1 MobilCom
8.3.2 Group 3G
8.3.3 Telefonica
8.3.4 Optimus
8.3.5 H3G Italia
8.3.6 Amena
8.4 Why pay a premium for sole 3-G?
8.5 2-G-3-G pricing compared
Chart 64: Pricing or non-recourse 3-G transactions
8.5.1 Amena
8.5.2 Wind Communications
8.5.3 E-Plus
8.6 Arrangers, lenders and advisers
8.6.1 Top telecom project financing mandated arrangers
Table 22: Global top ten project financing mandated arrangers in telecoms in 1997
Chart 65: Global top ten project financing mandated arrangers in telecoms in 1997
Table 23: Global top ten project financing mandated arrangers in telecoms in 1998
Chart 66: Global top ten project financing mandated arrangers in telecoms in 1998
Table 24: Global top ten project financing mandated arrangers in telecoms in 1999
Chart 67: Global top ten project financing mandated arrangers in telecoms in 1999
Table 25: Global top ten project financing mandated arrangers in telecoms in 2000
Chart 68: Global top ten project financing mandated arrangers in telecoms in 2000
Table 26: Global top ten project financing mandated arrangers in telecoms in 2001
Chart 69: Global top ten project financing mandated arrangers in telecoms in 2001
Table 27: Global top ten project financing mandated arrangers in telecoms in 2002
Chart 70: Global top ten project financing mandated arrangers in telecoms in 2002
8.7.1.1 Analysis
8.7.2 Top telecom project financing lenders
Table 28: Global top ten project financing lenders in telecoms in 1997
Chart 71: Global top ten project financing lenders in telecoms in 1997
Table 29: Global top ten project financing lenders in telecoms in 1998
Chart 72: Global top ten project financing lenders in telecoms in 1998
Table 30: Global top ten project financing lenders in telecoms in 1999
Chart 73: Global top ten project financing lenders in telecoms in 1999
Table 31: Global top ten project financing lenders in telecoms in 2000
Chart 74: Global top ten project financing lenders in telecoms in 2000
Table 32: Global top ten project financing lenders in telecoms in 2001
Chart 75: Global top ten project financing lenders in telecoms in 2001
Table 33: Global top ten project financing lenders in telecoms in 2002
Chart 76: Global top ten project financing lenders in telecoms in 2002
8.7.2.1 Analysis
8.7.3 Top telecom project financing legal advisers
Table 34: Global top ten project financing legal advisers in telecoms in 1997
Chart 77: Global top ten project financing legal advisers in telecoms in 1997
Table 35: Global top ten project financing legal advisers in telecoms in 1998
Chart 78: Global top ten project financing legal advisers in telecoms in 1998
Table 36: Global top ten project financing legal advisers in telecoms in 1999
Chart 79: Global top ten project financing legal advisers in telecoms in 1999
Table 37: Global top ten project financing legal advisers in telecoms in 2000
Chart 80: Global top ten project financing legal advisers in telecoms in 2000
Table 38: Global top ten project financing legal advisers in telecoms in 2001
Chart 81: Global top ten project financing legal advisers in telecoms in 2001
Table 39: Global top ten project financing legal advisers in telecoms in 2002
Chart 82: Global top ten project financing legal advisers in telecoms in 2002
8.7.3.1 Analysis
8.8 What next for project-financed telcos?
8.8.1 Hutchison 3G
8.8.2 Svenska
8.8.3 Bouygues Telecom
8.8.4 The future for non-recourse financing
8.8.5 Co-operation
8.8.6 Success ?
9. Conclusion
Diagram 7:Composition of project finance
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