Standard Chartered and RBS closed a US$318mn buyer credit facility backed by the Swedish export credit agency, EKN, for the purchase of telecoms equipment from Ericsson in Sweden by Indonesian firm Telkomsel in late December last year.

The equipment was required to support Telkomsel’s coverage and capacity expansion strategy in Indonesia.

The deal demonstrates the continued commitment by both the banks involved and EKN in supporting telecom deals in Indonesia – a market that continues to show growth potential. It is the first ECA transaction concluded by the borrower since 2002.

“This transaction is an excellent example of Standard Chartered combining its strengths in an important footprint country such as Indonesia where we have 13 branches, and overlaying it with our global expertise and strength in export finance,” comments Sarah Pirzada Usmani, regional head, structured export finance, at Standard Chartered.

The facility features a door-to-door tenor of eight years, and it allows Telkomsel to take timely delivery of equipment, and tap into an additional source of funding that will help the borrower ensure payments to the supplier.

The transaction benefitted from having a deal team that had a good understanding of the ECA process, as well as experience in structuring telecoms deals.

The new equipment will help Telkomsel to maintain its position as a market leader in Indonesia. As of March 2009, Telkomsel had 72.1 million customers, which represents a market share of approximately 50%.

It has the largest network coverage of any of the cellular operators in Indonesia, providing network coverage reaching over 95% of Indonesia’s population.

Telkomsel is majority-owned (65%) by Telekomunikasi Indonesia and it is the largest full-service telecoms operator in Indonesia. The remaining 35% is owned by Singapore Telecom Mobile (Singtel Mobile), which is a wholly-owned subsidiary of SingTel.

Singtel recently posted strong profits, with contributions from Telkomsel helping compensate for slightly weaker contributions from the conglomerate’s other business units.

Indonesia is one of the most promising economies in the Asia Pacific region, with GDP growth expected to accelerate from 4.5% in 2009 to 5.6% in 2010. Various economic indicators suggest the company is on target for recovery, with foreign direct investment picking up faster in the country than in many of the neighbouring countries.

Deal information

Borrower: Telkomsel
Amount: US$318mn
Mandated lead arrangers: Standard Chartered (facility and EKN agent) and RBS
Tenor: 8 years
Date signed: December 30, 2009