Axis Borrows Big for Growth

2:00 PM -- Competitive mobile operator Axis is hoping to make a bigger impact on the enormous Indonesian market (about 190 million users at the end of 2010) with some sizeable investments funded by some significant loans.

The operator, which has around 15 million customers (about 7 percent market share), is borrowing US$1.2 billion to build out its network in an effort to chase the country's big three mobile players, PT Telekomunikasi Selular (Telkomsel) (the clear leader with about 50 percent share) and second and third players PT Indosat Tbk and PT Excelcomindo Pratama Excelcomindo (XL Axiata), which each command about 20 percent of the market.

Of that money, $400 million is in the form of a loan, underwritten by the China Development Bank, to buy network gear from Huawei Technologies Co. Ltd. . The Chinese vendor has just been awarded a 3G mobile infrastructure deal by Axis to provide HSPA radio access network (RAN) gear, reports The Jakarta Globe. (See Huawei's Lucky Number: 30B.)

Another $350 million, in the form of a loan arranged by HSBC and backed by EKN (the Swedish Export Credit Agency), is to buy goods and services from Ericsson AB (Nasdaq: ERIC), which is already Axis's managed services partner. (See Ericsson Extends Axis Managed Services Deal .)

Given the size of Axis and the dominance of the top three operators, that might sound like a risk for the lenders, especially as Pyramid Research (in a Country Intelligence report published earlier this year) expects the big three to hold on to those market shares in the coming years, leaving Axia and other smaller operator PT Hutchison CP Telecommunications (HCPT), which is also a big Huawei customer, with the scraps. (See Indonesian Pay TV to Double by 2015 and AsiaWatch: FTTH, Huawei, 3G & M&A.)

But Axis is a subsidiary of Saudi Telecom Co. (STC) , which Pyramid describes as "deep-pocketed," so it's not without strong financial support as it battles for a bigger slice of one of the world's biggest mobile markets.

— Ray Le Maistre, International Managing Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In