Trowers & Hamlins advise on record breaking Islamic financing deal

The US $1.6bn murabaha* financing is to fund the winning US $ 3.5 billion bid for Saudi Arabia's new GSM and 3G mobile telecom licences.

The financing is more than twice the size of the Government of Dubai's planned US $750m Sukuk (Islamic bond) issue which is being used to help fund the redevelopment of Dubai International Airport.

Trowers & Hamlins says that the use of Islamic financing has grown rapidly over the last three years. Trowers & Hamlins explains that both major corporates and their lenders are becoming ever more comfortable with the concept and that the biggest global investment banks are moving to build their credentials in this area.

The murabaha, plus cash payments, will be used to replace a US$ 2.8 billion bank guarantee provided to Saudi Arabia's Communications and Information Technology Commission following the Etisalat consortium's winning bid.

Trowers & Hamlins explains that not only is the US$ 1.6 billion Islamic funding probably the world's largest Islamic financing, it also represents a novel way of using Islamic facilities to fund telecommunication licences.

Leroy Levy commented that: "It shows the flexibility of Islamic financing as a finance tool. The Etihad Etisalat transaction is another indicator that Islamic financing has come of age."

"Even by the standards of conventional corporate finance this transaction has been successfully completed within a very short timeframe."

Trowers & Hamlins also advised Etisalat and the group of six leading Saudi Arabian companies on their successful bid for Saudi Arabia's mobile telecom licences.

In view of Etihad Etisalat's ambitious launch programme, preliminary work has started on the network roll out and this will continue over the coming months.

United Arab Emirates based Etisalat, is the region's leading telecom service provider. Its Saudi partners in the consortium members include the General Organisation for Social Insurance, Al Jomaih Holding Co., Rana Investment Company, Binzagr, Abdul Aziz Al Sughiyir Investment Company and Riyadh Cables Group of Companies.

Etisalat's bid for the Saudi licences beat those of rival consortiums led by Spain's Telefonica, Kuwait's Mobile Telecommunications, South Africa's MTN Group, Egypt's Orascom Telecom and Italy's Telecom Italia Mobile.

The granting of the second GSM licence and the first 3G licence to the Etisalat Consortium is part of the deregulation of the Saudi telecom market, ending the monopoly of Saudi Telecom. The award of the licences gives Etisalat and its consortium members access to a largely unmet demand in a population of some 25 million.

Trowers & Hamlins' team was headed by Leroy Levy. Local advice was provided by The Alliance of Abbas F. Ghazzawi & Co. and Hammad & Al-Mehdar and The Law Office of Dr. Hasan Al-Mulla.