Telefonica , Europe's biggest telecoms operator by revenue, has secured a $1 billion export credit facility to buy equipment from Sweden's Ericsson AB , the company said on Tuesday.
"Telefonica continues to drive the use of diverse financing instruments, apart from bonds and loans, and to increase its financing deals with export credit agencies for financing equipment," the Madrid-based company said in a statement.
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The deal is backed by two Swedish export authorities, the Swedish National Export Guarantee Board (EKN) and the Swedish Export Credit Corporation (SEK). Government export credit agencies tend to support big deals that involve exports to emerging economies and provide a boost to local manufacturing.
Known as 'vendor financing', this type of loan is often given by makers of telecom equipment or their national export banks to help big telecom operators make purchases.
Chinese telecom equipment makers Huawei <002502.SZ> and ZTE <000063.SZ> have relied on backing from state-linked banks to offer financing to their big customers in recent years, giving them an advantage on some contract negotiations.
Telefonica, which operates in more than a dozen Latin American countries, said the network equipment and commissioning services from Ericsson were for various subsidiaries across the world.
In recent months Telefonica has announced deals with Ericsson to roll out super fast fourth-generation (4G) networks in Brazil, Chile and Britain.
Telefonica, which slashed debt to 51.3 billion euros ($66.74 billion) at end-2012 from over 58 billion euros last June, has benefited from friendlier market conditions for southern European companies since the beginning of the year, issuing 1.5 billion euros of bonds in January.
The company has also raised funds in various markets, printing a Swiss Franc bond in November and issuing bonds through its Chilean subsidiary in October.
Telefonica secured $472 million from an export credit facility in 2010 to buy equipment from Ericsson for businesses in Europe and Latin America, also with the backing of EKN and SEK.
The lead banks on the latest ten-year deal were Societe Generale , Banco Santander , Bank of Toyko-Mitsubishi UFJ and BNP Paribas .
Telefonica reported full-year results last week that showed signs of stabilization in its depressed home market, where one in four of the workforce is unemployed, cheering analysts who also highlighted its progress on debt reduction.
(Reporting by Clare Kane; Editing by Clelia Oziel)