Completel to Expand in France

Completel prices €120M equity and debt financing to fund network expansion plans in France

July 25, 2005

5 Min Read

PARIS -- Completel Europe N.V. (the "Company") is today announcing the pricing of a €120 millionequity and debt financing to fully fund an expansion plan to significantly enlarge itsaddressable market through leveraging on the unbundling of the local loop opportunity and toexpand its footprint from 9 to 80 metropolitan areas in France (the "Expansion Plan").

A favorable environment

The Company believes that the success of its business model, the strong development of theFrench broadband market and the evolution of the corporate telecom market towards more dataand network services, along with a favorable regulatory and competitive environment,represent a unique opportunity for Completel to accelerate its growth. Completel is planning tostrengthen its competitive position and exploit the growing data and VoIP markets through theunbundling of the local loop and its existing metropolitan fiber networks.Jérôme de Vitry, President and CEO of Completel Europe N.V., commented: “Our expansionplan is a unique opportunity to meaningfully expand our addressable market with a powerfulcombination of fiber access and unbundled DSL access. This network extension is anopportunity to capture a higher share of our customers’ total telecom spend, to target theuntapped potential of the SME market and finally, to address the entire wholesale marketthrough our national coverage.

This strategic move is a natural evolution to serve our customers, both in the corporate and thewholesale markets, with a broad range of turn-key voice and data communications solutionsoffered through an expanded footprint.We are convinced that there is a market opportunity to become the only alternative operatorwith a large metropolitan fiber network and a comprehensive DSL coverage of Frenchbusinesses.”

Significantly expanding the addressable market

As part of its Expansion Plan, the Company plans to invest approximately €84 million in 2005and 2006 to deploy a national fiber backbone and to deploy an extensive unbundled DSLcoverage of businesses in France.

The Company estimates that this natural network extension will allow it to significantly expandits addressable market, strengthening its competitive position in the corporate market, with theability to cover most of French medium and large companies, the majority of French SMEs,and almost the entire French wholesale market.

This will allow Completel to control its fiber and DSL networks from end-to-end. Therefore,the Company will continue to serve its customers with a suite of innovative IP and Ethernetbased services, such as turn-key IP and Ethernet VPNs, VoIP and IP Centrex, along with asuperior quality of service.

Addressing the needs of medium and large customers on a national scaleThe current fiber network coverage with its high density in the top nine metropolitan areasgives Completel an edge in serving large sites of medium and large companies. The expandedgeographical coverage will allow Completel to economically serve remote sites of thesecompanies across France.

With its expanded network, the Company believes that it will be able to address all the needsof its medium and large customers, from the largest to the smallest sites. Completel willcombine fiber access to customer sites requiring high bandwidth and security services withDSL access to customer sites requiring lower bandwidth, thereby addressing its customers’needs throughout tailored access infrastructure.

Reaching SMEs on a national basis

The Company believes that the network expansion will provide it with the opportunity to targetthe untapped potential of the French SME market through the offering of turn-key voice anddata solutions using unbundled DSL access at profitable economics within 80 metropolitanareas in the country.

For these SME customers, Completel will continue to propose the same kind of products andservices which the Company has successfully been offering through fiber access over the pastyears, favoring a combination of competitive voice, data and Internet services. Completelbelieves that such a bundled services approach is the solution preferred by most SMEs, since itsignificantly simplifies the management of their telecommunications needs. It will also allowthe Company to capture almost 100% of its customers’ telecom spend.

Addressing the wholesale market on a national basis

Completel anticipates that the Expansion Plan will allow the Company to move away from thecurrent niche strategy towards a national coverage of the wholesale market. The Companyintends to offer a complete portfolio of wholesale services, including expanded long distanceand access services, as well as nation-wide switched services, to the carrier and serviceprovider community by leveraging on its expanded network and its new DSL access.

Expanding the size of the Company

As part of its expansion plan, Completel will significantly increase its human resources inorder to address a larger market and to continue to offer superior quality of service andrelationships to its existing and future customers. Reinforcement of the teams will be achievedin all functions : sales and marketing, customer and network operations and support functions.

Financing terms

The Company raised jointly €40 million in equity issued by it and €80 million in debt (seniorsecured notes) issued by its French subsidiary Completel S.A.S. in a private placement to alimited number of qualified institutional investors. The equity portion comprises 1,176,470newly issued shares at a price of €34 per share representing approximately 13.2% of theCompany’s issued share capital. As part of the transaction, Completel has agreed to not issue,offer, pledge, sell or otherwise transfer or dispose of its shares for a period of 180 daysfollowing completion of the transaction, subject to certain exceptions. The senior secured notesissued by Completel S.A.S. mature in 2012 and pay a 11% cash coupon.

Alexandre Westphalen, CFO of Completel Europe N.V., commented: "This €120 millionfinancing fully funds our business plan and gives us the proper financial flexibility to executeour Expansion Plan. This balanced equity and debt placement optimizes our balance sheet andfinancing structure for future years. Our stock issuance close to market price is a tribute ofinvestors’ confidence in the company's ability to create shareholders’ value through theimplementation of this strategic expansion.”Morgan Stanley acted as sole lead manager on the transaction. Headwaters MB acted as coadvisorto the Company.

Completel S.A.S.

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