Du seals $269 million deal with NSN
Deal will allow Du to continue expanding its 2G network throughout the UAE.
UAE operator Du has struck a EUR200 million ($269 million) vendor financing agreement with Nokia Siemens Networks, in a deal backed by Finnvera, a financing company owned by the State of Finland.
The deal will give Du access to EUR200 million of vendor financing through Nordea Bank, for the purchase of NSN equipment for the expansion of the operator's 2G network. NSN is the majority vendor supplier to Du for 2G and core works.
A spokesman for Du said that the deal would allow Du to meet demand for "better coverage and capacity" in the UAE by continuing the roll out of its 2G network.
Vendor financing deals are increasingly popular in the telecoms sector as vendors vie for business amid growing competition, although such deals can have an impact on the balance sheets of the vendors, which will inevitably be paid months or even years after projects have been completed.
Milan Sallaba, an independent telecom consultant based in Dubai, said that involving a bank, as NSN has done, could offer a way around this problem. "The operator usually benefits in that they are able to secure often significant credit directly from or through - as in this case - their equipment suppliers, and typically on terms they themselves could never have obtained from a bank directly," he said.
In this way, the operator effectively obtains a loan arrangement from the vendor that could be seen as a discount on the price of equipment, for example in terms of favourable interest rates. "The vendor gets to close a deal that they otherwise may not have been able to get, for example due to lack of operator funds, and hence very often extend very generous terms to operators," Sallaba added.