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. Last Updated: 07/27/2016

Sonic Draws $138M in Foreign Lending

Mobile operator Sonic Duo on Tuesday received a $75 million credit from the World Bank and the European Bank for Reconstruction and Development -- the first tranche of a total $138 million in fresh foreign financing.

The EBRD and the International Finance Corp., the World Bank's private-lending arm, will each provide $40 million: $24 million in the form of a loan, $6 million of "quasi-equity" and a $10 million syndicated loan from Germany's HypoVereinsbank and Nordea, a financial services company that operates in Scandinavia and the Baltics, the EBRD said in a press release.

HypoVereinsbank and Nordea also will underwrite a $58 credit backed by the Swedish Export Credits Guarantee, the country's lending agency.

The loan represents the first major international financing for a Russian telecommunications project since the 1998 financial crisis.

The loan comes at a good time for Sonic, which operates under the national brand Megafon. The operator has been struggling to gain market share from its two main competitors, Mobile TeleSystems and Vimpelcom.

"Support and recognition of the new operator by international financial institutions is the best acknowledgement of market potential," said Sonic general director Alexei Nichiporenko. "The money will be directed toward the development of the Megafon network and expansion in the Moscow area, increasing demand for our services."

Sonic arrived as Moscow's third GSM operator last November but has been struggling to upgrade its network to match the quality of MTS and Vimpelcom.

Network development will include boosting coverage in the Moscow region, introduction of new services and improving the operator's customer service, said Sonic spokesman Roman Prokolov.

"We plan to provide stable coverage of the Moscow region, comparable to that of our competitors, by the end of the year," he said.

Sonic has more than 300 base stations in Moscow and the Moscow region, Prokolov said, adding that the company has signed up 40,000 subscribers since its launch in November and the average revenue per user is $30 per month.

Sonic signed up 15,000 new subscribers in Moscow in January, according to the Renaissance Capital brokerage, compared with 170,000 subscribers for Vimpelcom and 20,000 to 30,000 subscribers for MTS.

The loan is a great news for Sonic, analysts said.

"This money is enough to build a quality network with high-quality coverage of the Moscow region," said Andrei Braginsky of Renaissance Capital.

If Sonic improves its network, the company could attract a major share of the high summer sales, he said. "By mid-year, Sonic Duo could become a real competitor to MTS and Vimpelcom."