Russian state-controlled Rostelecom (MOEX:RTKM) has agreed a credit line of up to US$600m with China Development Bank (CDB).
Russian state-controlled Rostelecom (MOEX:RTKM) has agreed a credit line of up to US$600m with China Development Bank (CDB).
The transaction comes just a few days after MegaFon, the country’s second-largest mobile operator, signed a 10-year vendor financing contract with CDB also worth up to US$600m.
Rostelecom said in a statement that the long-term financing will be used to fund telecoms projects with Chinese manufacturer Huawei and to refinance existing debt.
The fixed-line operator and Huawei signed a strategic partnership agreement in 2014 and have cooperated on a number of major projects in Russia, including the construction of the largest fibre optic data network in Europe. The two are now laying a subsea fibre optic line between Kamchatka, Sakhalin and Magadan.
Rostelecom finance director Ilya Ponomarev said this marks the company’s first credit line with a Chinese bank to fund its projects with Huawei.
“Raising funds from the Asian markets helps us to broaden our creditor base and diversify our debt portfolio, making it more balanced and sustained,” he said.
MegaFon’s 10-year vendor financing contract with was signed during Russian president Vladimir Putin’s recent visit to China, during which the two countries inked a number of trade agreements. It will be used to fund purchases from Huawei and refinance debt.
Equipment purchase costs have skyrocketed for Russian operators due to the weakening rouble and international sanctions.
Rostelecom has focused on the fixed-line broadband and pay TV markets since it merged its mobile assets with Tele2 Russia last year to create a new national operator, T2 RTK Holding, which operates under the Tele2 Russia brand. The new player is the country’s fourth-largest mobile operator behind MTS, MegaFon and Vimpelcom.
Rostelecom was not immediately available for further comment on the new loan.