Areeba Afghanistan LLC

MIGA has issued a guarantee of $74.5 million to the MTN Group of South Africa to help meet the increasing demand in Afghanistan’s telecommunications sector. Another $2 million is being guaranteed by the MIGA-administered trust fund, Afghanistan Investment Guarantee Facility. The guarantees cover the MTN Group’s $85 million investment in Areeba Afghanistan LLC. The coverage, for a period of up to five years, will protect the investment against the risks of transfer restriction, and expropriation.

The project enterprise, a 90 percent subsidiary of the MTN Group, has a 15-year license to provide state-of-the-art telecommunications services to clients throughout the country. The network launched in 2006 and covered 13 provinces at the end of 2006. The network currently covers 21 provinces and its subscriber base of 400,000 is growing rapidly. MTN’s investment is supporting coverage into additional provinces. The project involves the installation, operation and maintenance of a 100 percent digital GSM technology network, wireless cell phone, Internet, and satellite services, as well as public pay phones.

After more than two decades of conflict, Afghanistan began an enormous political, economic, and social transformation in 2002. Despite some early gains, tremendous challenges remain. Capacity remains uneven and weak overall, systems and procedures rudimentary, though improving, and many areas of the country are seriously affected by conflict. Reconstruction needs are enormous and underscore the need for private sector help in meeting the challenge.

This project meets two of MIGA’s priorities: encouraging investments in conflict-affected nations, and promoting “South-South” investments. MIGA’s support for the project is in line with broader World Bank Group goals in Afghanistan, in particular with regard to supporting the growth of a competitive private sector. The lack of a functioning telecommunications network throughout the country is an important constraint to the development of private sector activity. The project is expected to help develop infrastructure and increase fiscal revenues, as well as complement the work being done by the World Bank to improve the telecommunications regulatory regime in Afghanistan. MIGA’s participation in the project also complements the work of the IFC, which has an equity stake in this project and is also providing debt financing.