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Saudi telco seeks world's largest Islamic loan

The country's third mobile operator hopes to raise $3.7bn in the next three weeks to help pay for its licence.

Saudi Arabia's third mobile phone operator is negotiating the world's largest Islamic loan to raise $3.7 billion in the next three weeks to help pay for its licence, the group said on Monday.

A consortium including Kuwait's Mobile Telecommunications Co. (MTC) will itself put up the rest of the $6.11 billion licence fee it agreed to pay earlier this year for access to the telecoms market of the world's largest oil exporter.

"We expect the loan to be wrapped up within three weeks," Marwan al-Ahmadi, the consortium's chief executive, told reporters in Riyadh.

The loan will be structured as a "Murabaha" facility, under which a financier buys a commodity and sells it to the customer at a higher price, complying with Islam's ban on lending with interest.

The consortium intends to take a one-year or two-year bridging facility and convert it later into a longer-term debt, Ahmadi said, declining to name the banks he was talking to.

The loan tops the $2.88 billion raised earlier this year by Saudi Arabia's second mobile phone operator, Etihad Etisalat (Mobily), which had been the largest ever raised from banks in compliance with Islamic law.

The consortium will also raise money by selling a 40 % stake to the public and 10 % to government funds after the Islamic fasting month of Ramadan, Ahmadi said. Ramadan is set to end in mid-October this year.

The company will compete with state-controlled Saudi Telecom Co. and Mobily, an affiliate of Abu Dhabi-based Emirates Telecommunications Corp., for a potential customer base of 24 million.

About 65 % of Saudi residents have mobiles, according to official figures, though some have more than one and the overall penetration rate is 85 % - a figure which could grow to 120 % by 2011, Dubai-based investment bank Shuaa Capital said in March.

Ahmadi said his company would offer international calling and roaming packages to take advantage of MTC's international network, which spans about 20 countries.

The new Saudi operator plans to invest up to $2 billion in its first three years to build its network and should make its first profit by 2009, he said.

The consortium, which includes Saudi dairy firm Almarai, expects to start operations in 2008, Ahmadi said.

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