Du rings up $220m more financing for expansion

Du successfully refinances its upcoming loans, but analysts say the company will require further financing as it ups the ante in its battle with Etisalat.

Telecoms company du has secured a new round of financing as it ramps up expansion plans, but surprised analysts who had expected the company to raise greater amounts of capital for the year ahead.

The club financing deal results in a three-year loan facility worth $220 million (Dh808m) for the telecoms company, as du throws down the gauntlet to Etisalat by seeking expansion in its Abu Dhabi stronghold.

But the size of the loan facility, worth around a quarter of the loan facility due for repayment later this month, has raised questions about du's future capital needs.

Osman Sultan, chief executive of du, said: "This facility is the latest part of our financing strategy, and further strengthens the company's financial and operating position."

He added: "Some of the loan facility will be used to repay the existing Dh3 billion loan that becomes due at the end of June, and the rest will be used to fund our ongoing investment into providing an unrivalled service to our customers and of course provide the right returns to our shareholders."

The company will use the proceeds of this loan facility to pay off the rest of its debts coming due, the company said in a statement to the Dubai Financial Market, though it will also need to dip into its cash resources.

Du remains well-financed, with Dh2.9 billion in cash and near-cash items on its balance sheet at the end of March, according to the company's financial statements.

Mohamed Hamdy, a telecoms analyst at CI Capital Holding, said: "We're not surprised with this loan - it was already expected in our forecasts. The surprise was the size."

The company might need still more funds to finance its operational and capital expenditures in the months ahead, Mr Hamdy added. "I'd expect the company will seek another round of financing from other banks at better rates. But at least this will repay the existing loan.

"The company needs a huge amount of capital for infrastructure," he added.

du has embarked on a number of efforts to raise capital during the past year as it seeks to up the ante against Etisalat, the rival telecoms provider, including a rights issue in June, and vendor financing agreements.