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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (17685)	1/9/2002 1:20:36 PM
From: Ruffian	Respond to of 34857

France Telecom Likely to Guarantee MobilCom's Bank Loan Renewal By Simon Clark Frankfurt, Jan. 9 (Bloomberg) -- France Telecom SA will probably have to guarantee part of a 4.7 billion-euro ($4.2 billion) credit for MobilCom AG to get banks to renew the loan when it expires in July, the German mobile phone company said. France Telecom, which owns 28.5 percent of MobilCom, would be following the example of Hutchison Whampoa Ltd., which in September agreed to guarantee loans for H3G SpA, its Italian mobile phone unit, to win credit from bankers. Banks have grown cautious after European phone companies borrowed about $100 billion in 2000 for licenses to offer mobile phone users swifter Internet access, or so-called third generation technology. Credit is hardest to find for companies such as MobilCom and H3G, which have few or no existing clients. ``Banks need guarantees because there's so much uncertainty surrounding the technology -- whether it's revenue, pricing or even the construction of the handset and the networks,'' said Werner Staeblein, an analyst at BHF-Bank AG in Frankfurt. ``Believing in the new technology is still as much about faith as about hard facts.'' MobilCom borrowed 5.8 billion euros from banks in August 2000 to pay for its Universal Mobile Telecommunications System license and to build a network to offer the new service. It repaid 1.1 billion euros of that last July using 423 million euros of a 2 billion-euro loan from France Telecom and part of a 2.2 billion- euro financing from equipment suppliers Ericsson AB and Nokia Oyj. The remainder of the 2000 credit expires in July. Guarantee While France Telecom guaranteed the purchase of MobilCom's UMTS license and the construction of its network, the French company didn't guarantee the 2000 loan, making it a so-called non- recourse financing. ``It's not very likely we will get non-recourse financing as market conditions are difficult at the moment because telecom share prices have dropped so much,'' said Reiner Sedat, MobilCom's head of investor relations. ``With France Telecom we have a good chance of getting favorable terms.'' MobilCom's shares have slumped 93 percent since they peaked in March 2000. The Bloomberg European Telecommunication Services Index has fallen 80 percent over the same period. Merrill Lynch & Co. arranged MobilCom's 2000 financing with ABN Amro Holding NV, Deutsche Bank AG and Societe Generale SA. BNP Paribas SA, J.P. Morgan Chase & Co.'s Chase Manhattan Corp., Dresdner Bank AG. ING Groep NV, Westdeutsche Landesbank Girozentrale, Bank of Tokyo-Mitsubishi Ltd. and Sumitomo Mitsui Banking Corp. also helped extend the credit. Tough Sell MobilCom didn't find it difficult to get banks to arrange the financing in the summer of 2000, Thorsten Grenz, the company's chief financial officer, said at the time. By the beginning of 2001 it proved tough to sell the loan on to other banks as confidence in the success of the new mobile phone technology diminished. ``There was so much euphoria around in 2000 that many banks got involved in third generation financing,'' said Joachim Koller, an analyst at Merck Finck & Co. in Munich. ``Then everything calmed down and turned pessimistic.'' In Italy, where H3G needs 5.2 billion euros to build its network, Hutchison Whampoa had to guarantee 2.2 billion euros of loans because banks were only prepared to lend 1 billion euros without such a guarantee. Hutchison, which is still trying to complete negotiations with banks, will itself lend a further 1 billion euros while equipment suppliers will provide another 1 billion. Between 12 and 16 banks are preparing to commit to H3G's loan in coming days, bankers said. Backing MobilCom is likely to get its new financing in July, partly thanks to France Telecom's guarantee and partly because banks are under pressure not remove their backing for the company, analysts said. ``MobilCom could go bankrupt if they don't extend the loan, so it's better for them to support the company a few more years to see if they can make it,'' BHF-Bank analyst Staeblein said. MobilCom is likely to refinance the credit in the loan market, though it may consider selling bonds or notes that are convertible into shares if the market improves, Sedat said. MobilCom plans to introduce General Packet Radio Service phones, which aren't quite as fast as UMTS mobile phones, in the first quarter of this year. UMTS services are planned to start in the second half of the year. ``If the GPRS service goes well then it would help inspire more confidence with the banks,'' Merck Finck & Co.'s Koller said.