Telecom Egypt (TE) has secured permission from its board of directors for an investment of US$90 million towards its acquisition of Middle East and North Africa Submarine Cable (MENA Cable) system, a subsidiary of Orascom Telecom Media and Technology Holding S.A.E, two months after it revealed that it wished to channel part of the 2017 dividend into the project.

In communication to investors the company stated, "The board of directors approved the acquisition of Middle East and North Africa Submarine Cable (MENA Cable) by a 50% owned subsidiary (Egyptian International Submarine Cables Company) with a total enterprise value of USD 90 million to be financed through a shareholder loan from Telecom Egypt."

Last month the telco revealed its intention to reduce the dividend for FY 2017 to EGP 0.25 from the EGP 1 per share in order to finance the purchase of what was then an unidentified cable project.

Ahmed El Beheiry, Telecom Egypt's Managing Director and CEO said, "The amendment of the dividend proposal for FY 2017 is intended to avail short-term financing to an investment opportunity that Telecom Egypt believes is crucial for the continuation of the revenue stream of its cable business and comes in line with our prudent cash flow management. The company intends to maintain its long-standing dividend policy to its shareholders in FY 2018 and beyond. Such dividend policy aims to provide investors with a continuous stream of annual dividends, while balancing dividend distribution and the reinvestment of its cash flows in its Capex program, which is viewed as the key driver for inducing future growth."

MENA Cable connects Europe to the Middle East and Southeast Asia through North Africa and the Middle East. The cable system spans three continents (Europe, Africa and Asia) and currently lands in five countries (Italy, Egypt, KSA, Oman, India) in conjunction with TW1 cable in UAE and Pakistan. It also includes branching units that cover Greece, Sudan and Djibouti.

In a message on the MENA Cable website, CEO Kamran Malik said the project is in a "unique position to propose a one stop shop to satisfy the fast growing capacity demands in markets of Middle East, India and South of Asia" due to its location.

The MENA Cable system stretches 9, 030 km of which 930km is terrestrial fibre crossing Egypt and consists of six fibre pairs, each pair expandable to 8 TB/s with a total capacity of 48 TB/s.

900 million in credit facilities

Along with its approval of the MENA Cable deal, the TE board passed a second resolution for the telco to obtain USD credit facilities.

According to the company this will enable it to repay instalments in line with its cash flow generation while providing flexibility to finance its working capital needs and availing a lower interest financing option to invest in its 4G network.

The credit facilities are a 5-year syndicated loan of up to US$ 500mn arranged by Mashreq Bank and First Abu Dhabi Bank, a renewable 12-month short-term credit facility provided by Abu Dhabi Islamic Bank and African Bank for Import and Export with a maximum of US$ 200 million, as well as a 4-year vendor finance agreement with Huawei with a limit of US$ 200 million.

The vendor finance agreement carries a grace period of 24 months.