Saudi Telecom Company (STC) has closed a $1.2bn financing deal for its Indonesian subsidiary Axis.
The sharia-compliant deal has a tenor of seven and a half years and comprises three facilities. The first is a $450m Murabaha commercial facility arranged by Germany’s Deutsche Bank and HSBC, which has been underwritten by Deutsche Bank and Saudi British Bank (Sabb). Another $400m facility is for equipment purchases from China’s Huawei has been underwritten by China development Bank. The third is a $350m facility for equipment purchases from Sweden’s Ericsson, which has been arranged by HSCB and backed by Swedish Export Credit Agency, EKN.
“Most of the funds will be used for capital expenditure, which is why we took funding from outside,” says Ameen al-Shiddi, chief financial officer at STC.
The transaction is the largest Islamic funding in Indonesia to date and the largest telecoms investment in the country. STC plans to fund Axis’ expansion strategies over the next five years, when it hopes to increase revenues by 10 per cent.
The telecoms operator has been looking for financing for Axis since 2009. It failed to attract the support of local Saudi banks for the project in 2010, which Al-Shiddi says was due to “challenged financing markets and an incredibly difficult time for a new Indonesian corporate to raise financing of this magnitude”.
STC announced a $280m sharia-compliant deal for its operations in Bahrain in January 2011. It is working on a similar fund for its unit in Kuwait.
“We are looking at the funding requirements for Kuwait, once the mechanisms are identified, we will look at the structure for a sharia-compliant fund,” says Ghassan Hasbani, chief executive officer of STC’s international operations.