The contract - most of which will be sourced from Motorola's Swindon factory - will supply radio base transceiver stations, softswitches and associated software which will be used by Russia's OJSC Mobile TeleSystems (MTS) to provide additional mobile phone capacity as it expands its coverage across key regions of the Russian Federation.

ECGD has guaranteed, under its buyer credit finance facility, a $23.8 million (USD) bank loan from Barclays Bank plc which will be used by MTS to help meet the cost of the contract. UK Trade Minister Ian Pearson said: "ECGD and Barclays have listened to their customers and worked hard to produce an attractive facility for MTS which may bring further business to the UK as the company looks to strengthen its position across the Russian Federation."

And he added: "Export credit financing deals of this kind can often deliver longer credit periods than are available from the commercial market, thereby helping to spread the heavy capital expenditure costs associated with the expansion of mobile phone networks."

The deal also marks the first time in which the UK's official export credit agency has taken clean balance sheet risk on a Russian corporate buyer, as opposed to requiring third party security, e.g. in the form of an acceptable Russian bank guarantee.

And due to the way the deal has been put together, MTS will also have the ability to finance further contracts placed with Motorola within the facility's two year ordering period without having to negotiate separate loan agreements for each one.

Motorola Credit Corporation's senior customer financing manager, Gerard Grady, said: "The team at ECGD played a very helpful and supportive role in the successful conclusion of this transaction by fully understanding the needs of Motorola and MTS."

At present, mobile phone market penetration is about 41% in Russia, while in its capital Moscow, the largest and most lucrative market, the figure is nearer 90%, very high even by Western European standards.

As in many other countries, the constraints of the existing fixed line network have boosted interest in mobile telephone technology, particularly amongst business users, leading to rapid growth and development. MTS currently has over 32 million subscribers in Russia and a further 10 million others in Ukraine, Belarus and Uzbekistan.

© "Business Credit Management"