RIYADH, 27 September 2004 — The successful conclusion of the world’s largest Islamic financing transaction was announced here yesterday 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 generated the $2.35 billion Islamic transaction setting a benchmark for Islamic financing deals in the years to come.
Addressing a press conference here, Muhammad Hassan Omran, Etisalat’s president and CEO, said: “The $2.35 billion 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 $3.45 billion license fees besides contributing to operational costs projected to be $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 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 are the financial advisers and Trovers and Hamlins acted as the legal advisers 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 $2.8 billion, which is 80 percent of the license 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 incudes Abdul Aziz Al-Saghyr Commercial Investments Company, Abdullah & Said M. O. Binzagr Company, Al-Jomaih Holding Company, Rana Investment Company and Riyadh Cable Group of Companies. “While Etisalat will hold 35 percent stake in Ettihad Etisalat Company, the new entity will be a Saudi company employing mainly Saudi nationals,” said Meshar.
