Chinese bank backs mobile operator in Poland

China Development Bank has agreed to lend €640m ($993m) to a fledgling Polish mobile phone operator in a deal believed to mark the bank’s first foray into the fast-growing markets of eastern Europe.

The financial backing forms part of an €1.1bn capital injection for Play, a Polish 3G mobile operator, in a tie-up involving Huawei, the Chinese telecommunications equipment maker.

Play is 75 per cent owned by Novator, an investment group controlled by Thor Bjorgolfsson, an Icelandic entrepreneur with many telecoms interests in Europe.

The remainder is owned by Panos Germanos, a Greek businessman. As part of the refinancing deal, the duo will commit €460m of equity funding.

Play has attracted 1.4m customers since starting operations 16 months ago, becoming the fourth-largest operator in the mobile market, and the fresh financing ranks as expansion capital.

Huawei has been hired to upgrade Play’s infrastructure, highlighting its increasing success in securing contracts in Europe, which have helped it to become a potent competitor to Sweden’s Ericsson and Alcatel-Lucent, the French-US company.

The CDB loan underscores the bank’s efforts to diversify its investment portfolio to become more global and spread across more sectors.

CDB is the largest of China’s so-called “policy banks”, which operate like domestic versions of the World Bank, raising money through bond sales and then lending to companies and projects in line with Beijing’s policies.

CDB had more than $330bn in assets at the end of 2006, the last time it published an annual report. Of the $83bn in loans it extended that year, only 3.3 per cent were to the telecoms sector.

Mr Bjorgolfsson developed a working relationship with Huawei while on an Icelandic state visit to China in 2005. Huawei on Wednesday said its relationship with the Polish operator “is not related in any way to any funding offered by CDB”.

CDB declined to comment.

Mr Bjorgolfsson told the Financial Times that the debt facility with CDB had been struck on “market terms” but declined to disclose the coupon to be paid.

Mr Bjorgolfsson said he hoped to work with the CDB on other investments. “We have more plans in central Europe and hope that future partnerships [with CDB] materialise,” he said.

He also said he wanted to establish Play as a “serious” fourth player in the market and expected it to break even in cash flow terms by 2010. Mr Bjorgolfsson said it was likely that the company would file for a public listing within the next two years, although he would remain as its majority shareholder “for a number of years”.

========================================
http://www.ft.com/cms/s/0/ca5faae8-3d5d-11dd-bbb5-0000779fd2ac.html