The European Investment Bank (EIB), the EU’s financing institution, is supporting Telecom Italia (TI) group’s investments in Italy and Germany with two loans for a total of EUR 382 million.
A first tranche of EUR 200 million of a total approved loan of EUR 400 (“Telecom Italia RDI loan”) is aimed at research, development and innovation (RDI) activities carried out by TI in Italy.
A EUR 182 million loan will support the investments made by TI’s fully owned German subsidiary HanseNet Telekommunikation GmbH (HanseNet) to finance the migration of recently acquired customers (Internet Service Provider AOL) and the necessary network and support system expansions. “Telecom sectors with state-of-the-art technological solutions and infrastructure, a competitive environment and advanced services, are major contributors to boosting productivity, employment and economic growth”, said EIB’s Vice President Dario Scannapieco while signing the two loans in Rome. “These projects are clearly in line with the EIB’s objective of furthering the Information Society through the support of RDI investments and the competitive supply of advanced broadband services”, he added.
The Telecom Italia RDI loan will contribute to develop TI’s innovative Information Communication Technology (ICT) infrastructure, hardware and software applications as well as facilitating improved Internet, multimedia and telecom services. In addition, it will support the development of services that stimulate the further development of broadband communications infrastructure and support European competitiveness in the ICT sector, with benefits to the wider economy.
The research is focused on new technologies and advanced network architectures. The development and innovation activities concern tailor-made IT (Information Technology) systems addressing issues such as security and convergence for fixed and mobile networks. Telecom Italia’s RDI program will help to stabilise the employment level of differents units involving about 1,600 researchers. The entire telecommunications market in Italy is expected to grow only about 1.6% annually until 2009. While the fixed line business is even expected to decline by 2% annually, the mobile business is supposed to grow by 2.1%. The highest growth rates are expected for Pay-TV (12.1%) and ICT (4.6%).The EUR 182 million loan to HanseNet will enhance competition amongst internet service providers in Germany which will positively influence the availability and quality of service especially in remote areas in East Germany. About 17 % of the investments will be located in five convergence regions.
The objective of the project is to expand the network capacity and coverage in order to absorb the 2 million additional AOL subscribers without interrupting their existing service. Furthermore, there are plans to gradually migrate the subscribers from the former AOL services to the own products and upgrade to value added services. HanseNet initially started as a fixed line city carrier in the Hamburg area only. In 2003 it was acquired by Telecom Italia and the focus was expanded to the whole of Germany. The main product is a bundled voice service together with a DSL-based broadband Internet access. At end of 2006 the broadband customer base was 929,000 lines (548,000 lines in 2005). The broadband market is growing fast in Germany. At the end of 2006 there were 14.9 m broadband connections, compared to 11.5 m in 2005. By 2009 some 22.4 m subscribers are expected.Note for the editor:
The European Investment Bank is the financing institution of the European Union (EU) and supports its strategic and policy objectives by making long-term loans available for economically viable capital investment projects.
The EIB’s shareholders are the EU’s 27 Member States, represented by their respective Finance Ministers, who are the Bank’s Governors.
More than 90% of EIB lending takes places within the European Union. Outside the EU, the EIB also operates under the mandate and using the budgetary resources of the Union.
In 2006, the EIB lent EUR 45.7bn, of which EUR 39.8bn went to EU countries. Lending in Italy amounted to EUR 5.161bn.
At end-2006, the Bank’s outstanding loans amounted to EUR 339.9bn, funds raised on the capital markets for its financing activities came to EUR 48.1bn and outstanding borrowings totalled EUR 296.4bn.
Owing to its solid financial structure and sound loan portfolio, the EIB enjoys a AAA credit rating, enabling it to raise funds on the capital markets at the keenest terms. The Bank passes on these favourable terms to its borrowers, with only a small mark-up.
As a complementary source of finance, the EIB can cover up to 50% of a project’s total investment cost. The EIB’s goal is to facilitate the establishment of a finance plan tailored to the characteristics of the proposed project in partnership with other banks and financial institutions.
EIB loans can supplement local, regional, national and Community budget resources. Where EIB finance is combined with EU grants, the authorised ceiling for covering the investment cost of projects rises to 70% (up to 90% for projects located in the EU’s Objective 1 regions).