Any further fundraising would be undertaken as an attempt to use corporate lending terms to lower interest costs once the company has built up a longer history of operating, and has improved its income.

Additional funds could be used to repay some of the debt used in the $2.9bn purchase of the Egyptian operator licence. One London-based project finance banker says he does not expect the firm to start making profits for at least two years.

Financial adviser Calyon is in advanced discussions with six banks regarding the appointment of mandated lead arrangers for the $850m funding package. This debt will be split between a £E3bn ($542m) tranche and a further $300m tranche.

Price negotiations on the debt are under way, with banks saying the credit crunch and the fact that Etisalat Misr is still undeveloped in the market will play a part in discussions.

The three-year debt facilities will repay a lump sum on maturity, and bankers say there is an opportunity to expand.

The dual-currency structure is designed to reflect the expenses of the network development and minimise currency risk, considering the current dollar weakness.

HSBC, Barclays Capital, Citigroup and Deutsche Bank are believed to be among the shortlisted banks.

The group will be split between those that underwrite the Egyptian pound tranche and those that underwrite the dollar debt.

Once the six banks have been appointed, general syndication is planned to occur in early 2008.
In July 2006, Etisalat signed a deal with a syndicate of 22 banks for $3bn to finance expansion, and many of the same banks are expected to take part in the latest syndication.

Calyon’s corporate team is leading the deal because of the bank’s close relationship with the UAE telecoms firm, but many of the banks looking at the financing view it as a project finance deal. This is because Etisalat Misr is still a young company and the debt does not have the explicit backing of UAE parent company Etisalat.

Start-up costs have also reduced the parent company’s profit margin, according to analysts.
Currently, Etisalat Misr is forecasting more than 3 million customers by the end of 2007, and plans to invest more than $1bn on developing its network.