Networking

STC’s Indonesian arm gets funding

AXIS, the Indonesian subsidiary of Saudi Telecom Company, has signed $1.2 billion financing deal with a tenor of 7.5 years with local and international financial institutions. The deal comprises three facilities: $450 million Murabaha commercial facility, arranged by Deutsche Bank and HSBC and underwritten by Deutsche Bank and Saudi British Bank (SABB); a $400 million facility for equipment purchases from Huawei, underwritten by China Development Bank; and a $350 million facility for equipment purchases from Ericsson, arranged by HSBC and backed by EKN, the Swedish Export Credit Agency. All facilities have been structured in a sharia compliant manner.

This financing will help fund AXIS’ expansion and growth strategies for the next five years, especially expansion into mobile broadband and improved coverage nationwide, which in turn will result in higher financial returns for the Group. The Indonesian telecom sector has witnessed sound growth over the past few years owing to the rising mobile and internet penetration rates, which have had a positive impact on AXIS, with the company passing 11 million subscribers and with service available in more than 400 cities across Indonesia.

Announcing the financing deal and its structure, Ameen Al Shiddi, Chief Financial Officer (CFO), Saudi Telecom Company highlighted the significance of this deal saying, “This deal is one of the largest Islamic financing deals in Asia and one of the largest international financing deals in East Asia. This financing will help fund AXIS’ expansion and growth strategies for the next five years, which in turn will result in higher financial returns for the Group.”

 

Al Shiddi added, “The size of the financing deal demonstrates the confidence that the financial markets have in the ability of AXIS to achieve its business goals. The involvement of different financial institutions and vendors is a clear indication of the strong and long-term partnerships that exist between these organizations and STC.”

Ghassan Hasbani, Chief Executive Officer, Saudi Telecom International Operations said, “The Indonesian telecom sector has witnessed sound growth over the past few years owing to the rising mobile and internet penetration rates. The growth of our international operations has had a major impact on the Group’s overall revenues. This financing deal will enable AXIS to increase its broadband services offering to customers thereby tapping into the tremendous growth potential that exists in a highly competitive market.”

The country has been experiencing strong economic growth with average annual GDP growth of 5 percent from 2000 until 2010. Citing improvements in the nation’s economic performance and political stability, Standard & Poor’s international rating agency recently upgraded Indonesia’s BB rating to BB+ with a positive outlook. Indonesia’s economy expanded 6.5% percent in the first quarter of 2011 from a year ago, and as per the recent estimates of the central bank, foreign direct investment is expected to surge 42% this year. The Government is also facilitating growth in key sectors by boosting foreign investment.

Erik Aas, Chief Executive Officer of AXIS added, “Indonesia’s telecom industry is fast-growing and extremely dynamic with mobile broadband usage constantly on the rise. 50% of Indonesia’s population is below 30 years old, and the whole population is adopting social networking applications on their mobile phones.”

 

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