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Derivatives

Mobile Operator Enters Cross-Currency I-Rate Swap

U.K. mobile operator mm02 has entered a cross-currency interest-rate swap to convert a fixed-rate euro-denominated liability into a floating-rate sterling denominated one. Anthony Lawrinson, group treasurer in London, said the company converted half of a EUR1 billion (USD884 million) bond it sold earlier this month into a floating sterling liability. It also entered a plain-vanilla interest-rate swap to convert the remaining EUR500 million into floating euros. At the same time, the company also issued a fixed 10-year GBP375 million (USD536 million) bond, for which it will not enter a swap.

In the swap, mm02 will receive the five-year 6.375% coupon on the bond and pay sterling and euro rates at just over three-month Euribor. Lawrinson declined to reveal the rates. He said the company tapped the euro market but its primary funding need for now is in sterling. "We have needs for both sterling and euro debt, but at the moment the bulk of our [business] is in sterling so we have a greater short-term need for sterling," he noted.

Lawrinson anticipated the company will have less of a need for foreign exchange swaps in the future as it generates more of its revenue in euros. The swaps are the first entered under the name of mm02; the company was previously known as BT Wireless and offers wireless services under brand names, such as BT Cellnet in the U.K. and Viag Interkom in Germany.

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