Silk Road Fund partners AIIB to construct Omani fibre optic broadband

Oman seeks to modernize its telecommunications provision and this investment involves a long-term debt financing commitment, plus utilizing equity and operating cash flow

The Silk Road Fund has entered into a participation agreement with the Asian Infrastructure Investment Bank (AIIB) to provide a senior loan facility to finance the design and construction of the first phase of the national fibre optic broadband network project in Oman.

The national fibre optic broadband network project is part of its Oman National Broadband Strategy. The first phase of the broadband network will extend to capital city Muscat. Upon completion of phase one by the end of 2021, 80% of Muscat will have access to the high speed optical fibre network. The project aims to improve the communication infrastructure accessibility and quality, which would increase Oman's appeal as a destination for businesses such as manufacturing and logistics, in order to diversify Oman's economy and reduce its reliance on oil & gas exports.

The Silk Road Fund's participation is via an A/B loan structure led by the AIIB. Under an A/B loan, one entity is the lender of record for the entire A and B loan portions, in this case the AIIB. It then partners with other institutions who provide the B portion - in this case the Silk Road Fund.

According to AIIB documents, the financing plan involves long-term A/B loan debt financing totaling US$239 million.

Back in 2013, the Cabinet of the Ministers ratified the National Strategy for Broadband, and mandated the Ministry of Transport and Communications to oversee its implementation. The fibre broadband rollout plan started in 2014, and requires intensive capital expenditure over the next decade. The total project cost through 2021 is estimated to be around US$467 million, and is to be funded by equity, debt and operating cash flow from its on-going operation.