STC majority-owned Axis in $1.2bn deal

Axis, the Indonesian operator owned by the Saudi Telecoms Company, has completed a $1.2 billion Islamic financing deal.

Axis, the Indonesian mobile operator majority owned by the Saudi Telecoms Company, has completed a financing deal to fund its expansion.

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The US$1.2 billion (Dh4.4bn) Sharia-compliant deal should help finance the telecommunications operator's network expansion and boost mobile broadband services in the growing Indonesian mobile market.

Ameen al Shiddi, the chief financial officer at Saudi Telecoms Company (STC), said the deal, which is expected to run for seven-and-a-half years, was "one of the largest Islamic finance deals in Asia".

It is part of a wider $1.64bn plan to grow Axis operations in Indonesia, which has a population of 240 million but with relatively low mobile penetration levels.

Erik Aas, the chief executive of Axis, said the company had more than 11 million subscribers and was projected to have a 10 per cent share of the market by 2016.

"[In 2010] we doubled our revenues on 2009. We intend to do even better in 2011," he said.

Axis, which launched services in 2008, has national licences for 2G and 3G mobile services. It claims to have more than 100,000 BlackBerry customers and mobile data revenues on a par with its competitors.

STC, Saudi Arabia's largest phone operator by market value, earlier this year raised its stake in Axis to 80.1 per cent from 51 per cent.

Ghassan Hasbani, the chief executive of international operations at STC, said the company had committed up to $371 million in shareholder loans to Axis apart from the $1.2bn Islamic finance facility.

"In total, there is funding for Indonesia that is of a value of $1.64bn … This is the potential, this is the business plan requirements," said Mr Hasbani.

He said the two shareholders in Axis, STC and Maxis, had between them committed up to $440m in shareholder loans.

"STC has committed $371m … It hasn't been paid yet," he said. "The difference between $371m and $440m has been paid by Maxis as shareholder loans."

Several financial institutions arranged and underwrote the $1.2bn agreement, which comprises three facilities.

A $450m murabaha commercial facility was arranged by Deutsche Bank and HSBC and underwritten by Deutsche Bank and Saudi British Bank. The additional facilities involved the financing of telecoms equipment. Axis has secured a $400m facility for equipment purchases from Huawei, underwritten by China Development Bank, and a $350m facility from Ericsson, arranged by HSBC and backed by EKN, the Swedish export credit agency.

STC is also in the process of bidding for a mobile licence in Syria, which has been delayed due to the political unrest there.

Mr Hasbani said STC was ready to consider entries into additional markets through acquisition or organic growth, as it targets "more than 50 per cent of our revenues" from operations outside Saudi Arabia.