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| Axis Financing |
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In June, after nearly two years of work, Indonesia-based telecom company PT Natrindo Telepon Seluler (Axis, now known as PT Axis Telekom Indonesia) completed a financing that is notable for the amount raised, its innovative nature and its complexity.
Axis, the Indonesian subsidiary of Saudi Telecom, raised $1.2 billion through a triple-tranche transaction. The financing involved China Development Bank, Sweden’s export credit agency and the World Bank.
The deal originated in 2009 when HSBC began discussions with Saudi Telecom about how to finance Axis’s growth. Axis has more than 11 million subscribers and doubled its revenues from 2009 to 2010.
The first tranche of the deal was a $450 million Saudi riyal and US dollar dual-currency murabaha facility. The Multilateral Investment Guarantee Agency, a part of the World Bank dedicated to promoting foreign direct investment, gave the tranche a guarantee against Indonesian political risk. This was the first Islamic trade in Indonesia, and the first telecoms trade in Asia, to benefit from such a guarantee.
The second tranche was a $400 million facility for equipment purchases from Chinese telecommunications firm Huawei, underwritten by China Development Bank. The deal was China Development Bank’s first involvement in Islamic financing.
The final tranche was $350 million for equipment purchases from Sweden’s Ericsson, arranged by HSBC and backed by Swedish export credit agency EKN. This was EKN’s first foray into Islamic financing.
The deal also involved a hedging transaction, covering 50% of the rate risk and 75% of FX risk for the financing package. This is the largest Shariah-compliant hedge undertaken by an Asian corporate.
The transaction is expected to run for seven-and-a-half years, and will help fund Axis’s growth and expansion for the next five years.
