The global economy might be in a shambles, but if there is one sector that has continued on a positive growth trajectory, it is the telecommunications sector. In Asia alone, the telecoms sector is growing at a rate of 25% a year, with an estimated 2.6 billion subscribers in 2011, while the GCC telecoms sector is expected to double in value by 2012 to US$40 billion from US$22 billion in 2006. Other emerging economies such as Indonesia, India and Mexico are also seeing incredible growth, encouraging conventional and Islamic investors who are eager to tap into this seemingly foolproof market.
According to Chris Utting, a partner at law firm White & Case, the use of airtime as an underlying asset has dramatically expanded financeable asset bases, and the amount of financing that can be made available on a medium-term basis. “Forecast airtime sales far exceed the financing requirements of the company, allowing the size of the facility to be determined by the company’s financial needs and ability to support debt rather than being limited by the value of particular assets,” he added, referring to Etihad Etisalat (Mobily)’s US$2.875 billion Islamic facility in 2007.
Utting is optimistic on the future of Islamic telecom financing, stating: “The acceptance by the scholars of airtime as an asset for the purposes of a Shariah compliant financing gives telecom operators access to a new pool of potential capital by allowing dedicated Islamic banks to invest in their business. The amount of the available funding will not be restricted by the valuation of a particular asset, but be based upon the financing needs and credit considerations of the relevant company. Whether a greenfield financing or refinancing, the airtime facility structure should prove a welcome addition to the available financing options open to telecom operators.”