Sterling Cellular Plans $250m Ecb To Fund Network Expansion

The Essar-controlled Sterling Cellular, the Delhi cellular licensee, is planning to borrow $250-million (Rs 900 crore) from overseas markets to finance expansion of networks in Delhi, Uttar Pradesh (East), Haryana and Rajasthan and to repay a bridge loan of $90 million (Rs 324 crore) from Credit Lyonnais.

The external commercial borrowings (ECB) offering is being handled by Union Bank of Switzerland (UBS) which has the financial advisory mandate of raising funds for all the Ruia (promoters of the Essar group) telecom ventures. The roadshows for the ECB offering are expected to start by the second week of June and conclude before the end of the month.

 

Company executives have projected a total investment of Rs 1,600 crore over the next five years in Delhi, Uttar Pradesh (East), Haryana and Rajasthan. Sterling Cellular which is the holding company of Aircell Digilink, the licensee in Uttar Pradesh (East), Haryana and Rajasthan is expected to be geared at a 1:1 ratio. Equity investments of some Rs 650 crore have already been capitalised.

The ECB float being planned is to finance debt requirements for the entire life (10 years) of the project. The company has tied up $110 million (Rs 380 crore) in vendor credit at Libor plus 0.5 per cent from Siemens, which is setting up its cellular network in Delhi and the three circles.

UBS has been advising Essar on the sale of equity in the telecom ventures also. For instance, the bank has valued the scrip of Sterling Computers, the holding company of Sterling Cellular which in turn is the holding company of Aircell Digilink, the licensee in Uttar Pradesh (East), Haryana and Rajasthan at some Rs 1,312 per share. The company has applied for a $175-million (Rs 630 crore) American depository receipts/global depository receipts offering this year.

Essar Cellphone the brandname of Sterling Cellular and Aircell Digilink is targeting 100,000 customers in Delhi and the circles by March 1997, which is projected to go up to 400,000 by the turn of the century. The company currently has some 73,000 subscribers in Delhi.