New Funding Opportunities For Telcos? Islamic Finance Dials Into The Telecom Market With A New Airtime Facility

April 2007
Telecom Finance
Christopher Utting

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The recent announcement by Etihad Etisalat ("Mobily"), the Saudi Arabian telecom operator, of its 2.875 billion dollar Islamic financing was a first on a number of fronts. For Mobily, the achievements were clear; the amount of available funding and the pricing were unprecedented. As pointed out in its press release, it was the largest ever Islamic syndicated loan and the lowest rate of Islamic financing ever granted to a telecom operator in the Middle East and Africa. For the financial institutions and lawyers involved in Islamic and telecom finance, the transaction contained a further unique feature. A new Islamic finance instrument specifically designed for telecom operators, the airtime facility, allows Mobily to sell minutes of airtime to an airtime facility agent acting on behalf of investors. Mobily then acts as the agent of the investors and sells the airtime to its customers for a profit. Mobily is able to obtain the funds that it needs for its business through the sale of a large amount of minutes up front. The investors make a return on their investment similar to what they might make through a conventional loan through the subsequent distribution of those minutes over the life of the financing, but the profit element comes from a sale transaction, not interest.