Axis seals $1.2 billion funding

Indonesian subsidiary of STC Group signs a financing deal worth $1.2 billion
Axis' CEO Erik Aas sees huge potential for mobile broadband in Indonesia.
Axis' CEO Erik Aas sees huge potential for mobile broadband in Indonesia.


Axis, the Indonesian subsidiary of Saudi Arabia’s STC Group, has signed a $1.2 billion financing deal with local and international banks to fund its ongoing expansion for the next five years.

The sharia compliant financing consists of a $450 million Murabaha commercial loan, 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.

Erik Aas, CEO, Axis, said that the funding will be used for expansion and growth, particularly for mobile broadband.

“With this funding 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.”

Axis, which launched mobile services in 2008, has some 6.6 million active subscribers, and plans to increase this to about 9.6 million active subscribers by the end of 2011, Aas told reporters during a press conference in Dubai.

Aas said that Axis’ network, which is mainly leased from other companies, covers some 80% Indonesia’s population.

The CEO added that while Axis remains behind its mobile competitors in terms of voice revenues, the company is well-placed to gain a lead in mobile broadband. Axis launched 3G services at around the same time as Indonesia’s incumbent mobile operator, Telkomsel, and also has the same 3G spectrum, according to Aas.

Axis aims to gain a 7% share in Indonesia crowded mobile market within the next five years, Aas added.

Ghassan Hasbani, CEO of STC’s international operations, added that Indonesia’s 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 said.

Hasbani added that STC’s ultimate aim is to generate 50% of its overall revenues from its international operations.

With a population of some 245 million people and average GDP growth of 5% over the past decade, Indonesia offers a clear opportunity for mobile operators that are able to cope with the high level of competition and low ARPU. Indonesia's economy expanded 6.5%% in the first quarter of 2011 compared with the same period in 2010, and the country’s central bank expects foreign direct investment to surge 42% this year.

Axis competes with about five GSM operators in Indonesia, including market leaders Telkomsel, Indosat and XL Axiata.

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