EBRD Financing for Rural Communication Infrastructure Tokyo August 2004   

2 What is the EBRD The European Bank for Reconstruction and Development (EBRD) : AAA-rated multilateral institution founded in 1991 Playing a leading role in Central & Eastern Europe (CEE) and the former Soviet Union (CIS) The largest lender and private equity investor in this Region Business oriented - working closely with private sector clients on commercial transactions The EBRD

3 1. A Major, Deal-Oriented Institution EBRD had approximately € 16 billion of outstanding assets in the CEE and CIS Region as at 31 Dec 2003 In 2003, the EBRD – arranged 119 debt and equity transactions, committing € 3.7 billion for its own account; – 75% debt transactions, 25% equity transactions making it the most active financial institution in this Region

4 2. Regional Focus : a network of offices in 27 countries in 27 countries The EBRD

5 3. Taking risk and a long-term view Appetite for political and commercial risks in CEE/ CIS countries Long-term perspective on investment : – debt : non recourse/ limited recourse with maturities of years in the telecoms sector –equity : no specific time constraint for exit, 3-7 years preferred anchor investor reducing market volatility A catalyst for third party investment : EBRD’s commitments of € 22.7 billion through to December 2003 helped raise € 68.5 billion in total investment The EBRD

6 4. Large Regionally-Focused Portfolio Investments exclusively in Central/Eastern Europe and the CIS 100+ transactions per annum New investments: €3.5 billion per annum Assets growth: € 2 - € 2.5 billion per annum Assets in the portfolio € 15.6 billion The EBRD

7 Telecoms, Informatics and Media Team

8 Where are we at the EBRD? EBRD Banking Finance and Treasury Legal, Economics, Support Units Sector Business Groups Country Business Groups Infrastructure Financial Institutions Energy and Telecommunications Central Europe Russia and Central Asia SE Europe and Caucasus Telecoms, Informatics & Media Key sector for the EBRD (8% of all assets – low impairment) Dedicated team of 18 professionals Works closely with Country Teams

9 Team Portfolio Cumulative portfolio: €1.9 billion Covers 22 CEE/CIS countries Deal size: € million Maximum EBRD transaction size: €250 million Asset growth: € 200 million per annum Fixed line/Integrated 45% Mobile 30% Media/Other 25% Telecoms Team

10 Execution Execution driven by client objectives and market timetable Transactions have been negotiated, structured, documented and signed in months Extensive in-house legal expertise in telecoms regulation and structuring in CEE/ CIS countries Telecoms Team

11 Debt Products (1) Debt instruments –maturities up to years –stand-alone loans / syndicated loans / guarantees –limited recourse / non-recourse structured debt –capital expenditure financing / acquisition debt / balance sheet financing –senior / subordinated –fixed / floating rate –denominated in major currencies or certain local currencies Telecoms Team

12 Debt Products (2) EBRD’s Preferred Creditor Status EBRD has Preferred Creditor Status in respect of transfer and convertibility risk (Art. 21 of the Agreement establishing the EBRD) Tested ! Russia, August Payments to EBRD exempted from the transfer and convertibility moratoria EBRD loans are : EBRD loans are : not subject to restrictions on conversion of local currency or transfer of foreign currency not subject to restrictions on conversion of local currency or transfer of foreign currency not included in any general rescheduling of the country’s foreign currency debt not included in any general rescheduling of the country’s foreign currency debt generally exempt from country provisioning requirements generally exempt from country provisioning requirements exempt from withholding tax on interest exempt from withholding tax on interest Telecoms Team

13 Debt Products (3) EBRD A/B Loan Structure EBRD acts as a lender of record for the entire syndicated facility EBRD retains at least 35% of the loan for own account EBRD receives payments and passes them on to syndicate participants Participants benefit from EBRD Preferred Creditor Status EBRD Loan Participants Loan Agreement Participation Agreement Borrower Telecoms Team

14 Equity and Other Products Equity –private equity –IPO underwriting and IPO investments Quasi Equity –subordinated debt –convertible instruments Guarantees –political risk mitigation –credit enhancement Range of applications –large greenfield or existing expanding companies –privatisations and pre- privatisations –ownership changes/ rationalisation Telecoms Team

15 Direct Investment Facility –aimed at smaller businesses in early-stage transition countries –equity (and limited debt) –local equity participation strongly preferred –do not need hard-currency earnings –sponsors expected to make reasonable cash contributions but may also include capital in-kind –generally USD500,000 to USD2,500,000 –equity in range 25-30% - but up to 49% in short term –preferred investment span is 3-5 years - but up to 7 years

16 Micro and Small Business Loan Programme –aimed at individual entrepreneurs and small enterprises –strong regional focus - limited to specific countries –EBRD works through existing local banks and by setting up “greenfield” specialised micro-finance banks –assistance to develop staff and implement training –185,000 loans disbursing USD1.5 billion - so far! –terms vary from scheme to scheme but typically –small loans up to USD200,000 - maturity of up to 3 years –micro-credits from USD50 - USD10,000 - up to 12 months –delivers quickly!

17 Rural Communication Infrastructure

18 Current Team Portfolio - Regional Current Portfolio - €1 billion Russia: €90 million Central Asia: €63 million Including: –mobile telecoms –fixed line operators –ISPs –submarine cables –terrestrial TV –cable TV –software developers –systems integrators CEE 45% Russia 32% Central Asia 7% Telecoms Team SEEC 32% Regional 6%

19 EBRD Financing (1) Sound Banking Principles Transition Impact Additionality

20 EBRD Financing (2) EBRD funds up to –35% of total project costs for a greenfield project –35% of long-term capitalisation of an established corporate Usual minimum EBRD involvement is €5 million –Minimum project size is €15 million –Lower financing requirements are met by financial intermediaries funded by EBRD

21 EBRD Financing (3) Mobilisation of financing –Commercial financing –Other IFIs –Grants

22 Telecoms Team Contacts David Cooper Senior Banker tel: Izzet R. Güney Team Director tel: Team fax :