The successful conclusion of the world’s largest Islamic financing transaction has been announced by senior officials of Ettihad Etisalat and commercial banks of Saudi Arabia and other Gulf states.
The move by the UAE’s Etisalat to enter the expanding Saudi GSM market has helped the US$2.35bn Islamic transaction to set a benchmark for Islamic financing deals in the years to come.
Addressing a press conference, Muhammad Hassan Omran, Etisalat’s president and CEO, said: “The US$2.35bn bank financing for Ettihad Etisalat Company, which has been awarded the second GSM license and the first 3G license in the kingdom, is a significant milestone in the history of Islamic banking. Today we mark an historic event, a transaction that will go down in history and reverberate in the coming days throughout the international Islamic finance industry.
“This murabaha transaction – a shariah-compliant bank loan in two tranches – will partly fund the US$3.45bn license fees besides contributing to operational costs projected to be US$1bn during the company’s first year in business. The balance of the financing needs will be met through an initial public offer (IPO) of shares at a date to be announced next month.”
Referring to the financing transaction, Abdullah Sulaiman Al-Rajhi, chief executive officer of Al-Rajhi Banking and Investment Corporation (Arabic), said: “It is a significant transaction with a very different experience in which Arabic together with local and regional banks are also participating. We are working on a few other financing and loan syndication proposals.”
The transaction has been arranged by Samba Financial Group (the lead managers for the transaction), Arabic, National Commercial Bank, Citigroup, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Bank Al-Jazira, Kuwait Finance House and Emirates Bank.
Giving details of the transaction, Omran said BNP Paribas is the financial adviser and Trovers and Hamlins acted as the legal adviser for Ettihad Etisalat, which is still under formation. Clifford Chance acted as counsel for the lenders.
“To meet the regulatory authority’s deadline, the Ettihad Etisalat consortium provided irrevocable and unconditional guarantees for US$2.8bn, which is 80% of the licence fee,” Omran said. “This was arranged by NCB and Samba.”
“Throughout the bidding process, we were very impressed by the openness, fairness and objectivity displayed by the Saudi Arabian telecommunications regulator, Communications and Information Technology Commission (CITC),” said Obaid Saeed ibn Meshar, Etisalat’s senior executive vice-president.
Meshar said the Ettihad Etisalat consortium of founding shareholders comprises Emirates Telecommunications Corporation (Etisalat) and Saudi Arabian General Organization for Social Insurance (GOSI).
The consortium also includes Abdul Aziz Al-Saghyr Commercial Investments Company, Abdullah & Said MO Binzagr Company, Al-Jomaih Holding Company, Rana Investment Company and Riyadh Cable Group of Companies. “While Etisalat will hold 35% stake in Ettihad Etisalat Company, the new entity will be a Saudi company employing mainly Saudi nationals,” said Meshar.