Saudi Telecom Company (STC), said its Indonesian unit Axis has secured $1.2 billion in financing to help fund its expansion and growth strategies for the next five years.

The finance deal, with a tenor of seven and a half years, involves several local and international financial institutions and all facilities have been structured in a sharia-compliant manner, said a STC statement.

It comprises three facilities - a $450 million Murabaha facility, arranged by Deutsche Bank and HSBC and underwritten by DB and Saudi British Bank; 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.

The 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 statement added.

Announcing the deal, Ameen Al Shiddi, chief financial officer, said it was one of the largest Islamic financing deals in Asia and one of the largest international financing deals in East Asia.

'The deal 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,” he added.

According to him, 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.

Al Shiddi said 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,' he remarked.

Ghassan Hasbani, CEO of 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,' he added.

Commenting on the move, Axis CEO Erik Aas said Indonesia’s telecom industry is fast-growing and extremely dynamic with mobile broadband usage constantly on the rise.

"About 50 per cent of Indonesia’s population is below 30 years old, and the whole population is adopting social networking applications on their mobile phones," he stated.

The country has been experiencing strong economic growth with average annual GDP growth of 5 per cent 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.

"With this funding milestone in place, Axis is well set for its expansion into mobile broadband and improved coverage nationwide. This financing will fully support our expansion plans for the next few years, and we are well prepared to further grow our market share and revenues,” Aas added-TradeArabia News Service