Indian operator Reliance Communications is set to secure US$1.93 billion of funding from the China Development Bank Corporation (CDBC), with a memorandum of understanding signed by the two during a visit to India by the Chinese Prime Minister. The bulk of the cash, US$1.33 billion, will be used to re-finance Reliance’s 3G spectrum fees. However, the agreement also includes up to US$600 million towards the purchase of equipment from Huawei and ZTE, on top of an existing US$750 million facility “already substantially utilised” for hardware and services from the Chinese vendors. The proposed debt has a ten-year maturity, and will be provided by CDBC and other Chinese financial institutions. It is subject to certain regulatory approvals.
According to the Financial Times, an executive with Reliance said that “the Chinese do a great job when it comes to financing deals…We save about US$100 million a year compared to what we would [have to pay in interest] in India – that’s a lot of money.” Reliance has had something of a mixed few months: while it launched its first 3G networks in four cities this week, the company is involved in the ongoing 2G spectrum debacle, due to question marks over its relationship with Swan Telecom (now Etisalat DB). Earlier in 2010, it agreed to pay INR85.9 billion (US$1.89 billion) to buy 3G spectrum in 13 regions, making it the third biggest spender in the process after Bharti Airtel and Vodafone Essar. A deal to sell-off its towers arm also fell through, putting an end to a plan to significantly reduce its debt – although the company has reportedly not given up on this strategy yet. The company inked a 3G infrastructure deal with ZTE in September 2010.