Saudi Telecom Company is approaching banks for a syndicated loan of around SR2.25bn ($600m) to help fund the expansion of its subsidiary in Indonesia.

The loan is being arranged by the UK’s HSBC and will have a tenor of around seven and a half years. The deal will be denominated in Saudi riyals and is currently being marketed, primarily to Saudi banks.

“There is still a lot of liquidity in Saudi banks so it is the best place for Saudi Telecom to be raising money at the moment,” says one banker working on the deal.

In 2007 STC invested around $3bn buying a 25 per cent stake in Malaysian operator Maxis. That deal also gave it a 51 per cent shareholding in Maxis subsidiary Natrindo Telepon Seluler (NTS), which operates in Indonesia.

The loan will be used for the expansion of the NTS network to give it coverage across the whole of Indonesia, says the banker working on the deal.

“Saudi Telecom has bought into a developing market and needs to invest to in Indonesia to capitalise on that,” adds the banker.

Saudi Telecom operates in several markets outside Saudi Arabia. In January 2009 it was awarded the third mobile licence in Bahrain. It also operates in Kuwait and has a 25 per cent stake in Oger Telecom, the telecoms subsidiary of construction group Saudi Oger, which operates in Turkey, Lebanon, Jordan and South Africa.