Etihad Etisalat to fund second Saudi mobile phone licence with world's largest Islamic financing transaction

Riyadh, 26 September 2004: The move by one of the region's largest telecommunications companies, Etisalat, into the expanding Saudi Arabian GSM market has generated one of the world's largest Islamic financing transactions.

"The US$2.35 billion bank financing for Etihad Etisalat Company, which has been awarded the second GSM licence and the first 3G licence in the Kingdom of Saudi Arabia, is a significant milestone in the history of Islamic banking," said the senior executive, vice president of Etisalat, UAE, Obaid bin Meshar.

At an event held today at the Four Seasons Hotel to celebrate this major achievement, Etihad Etisalat Company's, project director, Mr Al Kaf said: "The US$2.35 billion Murabaha transaction - a Sharia-compliant bank loan in two tranches - will partly fund the US$3.45 billion licence fees. Also contributes to operational costs projected to be US$1 billion 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 shortly," Mr Al Kaf said. "The Islamic financing, comprising a US$1.6 billion facility and a US$0.75 billion facility, is a landmark event and reinforces Saudi Arabia's growing importance in the field of Islamic financing," he added. The transaction has been arranged by Samba Financial Group (the lead managers for this transaction), National Commercial Bank, Citigroup, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Al Rajhi Banking and Investment Corporation, Bank of Al Jazira, Kuwait Finance House and Emirates Bank.

BNP Paribas were the financial advisors and Trowers & Hamlins acted as the legal advisors for Etihad Etisalat which is still under formation. Clifford Chance acted as counsel for the lenders. Mr Obaid bin Meshar said: "To meet the regulatory authority's deadline, the Etihad Etisalat consortium provided irrevocable and unconditional guarantees for US$2.8 billion, which is 80% of the licence fee of US$3.45 billion. This was arranged by NCB and Samba Financial Group," he said.

"Throughout the bidding process, we were very impressed by the openness, fairness and objectivity displayed by the Saudi Arabian telecommunications regulator, the Communications and Information Technology Commission (CITC)." He added.

"It is testament to their dedication and professionalism that the process proceeded strictly in accordance with the timetable announced in the prequalification tender," he said.

The Etihad Etisalat consortium of founding shareholders comprises Emirates Telecommunications Corporation - Etisalat, Saudi Arabian General Organisation for Social Insurance ("GOSI"), Abdulaziz Al Saghyir Commercial Investments Company, Abdullah & Said M.O. Binzagr Company, Al-Jomaih Holding Company, Rana Investment Company, and the Riyadh Cable Group of Companies.

"While Etisalat will hold a 35% stake in Etihad Etisalat Company, the new entity will be a Saudi company employing, in the main, Saudi Nationals," Mr Omran said.

"We anticipate creating 4,500 jobs over the next five years," he said.

"The company's initial focus will be to provide quality services and advanced developments to the Saudi market, which is the most important market in the region."

Mr Mohammed said: "Market research reveals that there is considerable demand for new telecommunications technologies in Saudi Arabia but I should emphasise that Etihad Etisalat Company will offer services in line with guidelines provided by the Saudi Arabian telecommunications regulator, Communications and Information Technology Commission (CITC).

"Initially, GSM services will be rolled out in fourteen cities: Riyadh, Jeddah, Makkah, Medina, Dammam, Khobar, Dhahran, Thaqba, Mubarraz, Hofoof, Braida, Khamees Mushayt, Abha and Taif. The investment required to fund this rollout and subsequent expansion across the Kingdom is budgeted at around US$1 billion during the first year, " Mr Mohammed said.

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