GuarantCo Guarantees for Development

Description:

The project involves the financing of WPT (“Wataniya”) the second mobile licensee in the Palestinian Territories, during its launch and initial roll out in the West Bank Region.  Wataniya is sponsored by Qatar based Qtel Telecom Group and the Palestinian Investment Fund (“PIF”). GuarantCo’s Board approved the guarantees in December 2008 and they were issued in favour of two local banks within the Palestinian Territories on 16th January 2009.

Mobile voice and data communication in the Palestinian Territories are currently limited and of poor quality. The existing operator within the Palestinian Territories provides only partial coverage and many Palestinians are forced to carry a second Israeli SIM cards. Israel places significant restrictions on the movement of Palestinians, frequently closing check points between towns on the West Bank. Development of efficient mobile telephony is therefore not only an essential infrastructure requirement for business and commerce but also plays an important humanitarian role.

Wataniya is the single largest private sector investment in the Palestinian Territories, which is expected to underscore a more positive investment climate and attract other offshore investors by way of example. Under the licence agreement, Wataniya is required to list 30% of its shares on the Palestinian Stock Exchange which will also contribute to stimulating local investment.

The project is financed by The Bank of Palestine, The Commercial Bank of Palestine, Standard Bank, IFC Washington and Ericsson Credit.  GuarantCo provided commercial guarantees to Bank of Palestine and the Commercial Bank of Palestine covering US$10m of their total commitment of US$25m. The guarantees from GuarantCo provide significant comfort  to the local banks, also allowing them to increase their support for Wataniya beyond the limits usually imposed by the Palestinian Monetary Authority. EKN, the Swedish Export Agency provided guarantees to the offshore lenders, Standard Bank and Ericsson Credit.

Construction of the network by Ericsson has already started and a soft launch is targeted for Q2 2009. Wataniya is expected to create employment in the territory for c. 2000 people. Penetration rates, which are currently less than 25% and significantly lag neighbouring countries, are expected to increase substantially as the new competition forces down tariffs and service quality is improved.

Wataniya Palestine will pay US$385m to the Palestinian Authority for the Licence Fee. This represents a significant contribution to the Authorities’ budget. US$140m of this has already been paid up-front and the remainder of the licence fee will be paid when specific subscriber numbers are met.