By Andy Sambidge
Axis plans to use funds raised to drive expansion over next five years, increase broadband services
Axis, the Indonesian subsidiary of Saudi Telecom Company, said on Tuesday it has signed a $1.2bn financing deal with local and international financial institutions.
The sharia compliant financing will help fund Axis' expansion and growth strategies for the next five years, the company said in a statement.
The Indonesian telecom sector has witnessed sound growth over the past few years with Axis passing 11 million subscribers and serving more than 400 cities.
Ameen Al Shiddi, chief financial officer, Saudi Telecom Company, said: "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."
Ghassan Hasbani, CEO, Saudi Telecom International Operations, added: "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."
Indonesia has seen strong economic growth with average annual GDP growth of five percent from 2000 until 2010.
Its economy expanded 6.5 percent in the first quarter of 2011 from a year ago while foreign direct investment is expected to surge 42 percent this year.
Erik Aas, CEO of Axis, said: "With this funding milestone in place, Axis is well set for its expansion into mobile broadband and improved coverage nationwide."
Launched in April 2008, the company provides 2G, 3G and BlackBerry services nationwide and internationally.
The seven-and-a-half year financing deal comprises three facilities - a $450m Murabaha commercial facility, arranged by Deutsche Bank and HSBC and underwritten by Deutsche Bank and Saudi British Bank (SABB); a $400m facility for equipment purchases from Huawei, underwritten by China Development Bank; and a $350m facility for equipment purchases from Ericsson, arranged by HSBC and backed by EKN, the Swedish Export Credit Agency.