Abu Dhabi investors are weighing up plans to reduce their holdings in Iraq’s first publicly listed mobile operator, Asiacell, as a second telecoms share sale in the country catches their attention.
The initial public offering of Zain Iraq next year may encourage investors to spread their bets and suck some liquidity from Asiacell in the process, say fund managers.
The National Investor, an Abu Dhabi-based investment bank, reduced its shareholding by about half from its previous investment of US$2 million made immediately after Asiacell’sinitial public offering IPO. Invest AD said it would “probably but not definitely” cut some of its own $2m shareholding to “spread the exposure across the two companies”.
More than 100 people, including fund managers, analysts and bankers, came to speak with Zain Iraq’s investor relations team at Dubai’s Ritz-Carlton on Thursday.
The Iraq subsidiary of the Kuwaiti telecoms operator is planning an IPO next year to raise “north of $1 billion”.
“The initial impression was good, but we will have to wait and see for the valuations,” said Sebastien Henin, a portfolio manager at The National Investor.
Iraq’s three mobile companies – Asiacell, Korek and Zain Iraq – are required to list 25 per cent of their shares under the terms of the licences bought in 2007. Asiacell sold $1.27bn worth of shares in February. The offering was Iraq’s biggest ever and helped the market capitalisation of the Iraq Stock Exchange double from $4.6bn to $9.2bn.
“We reduced our exposure [in Asiacell] for technical reasons, due to the fact that we think the IPO was too big for the Iraqi market, which wasn’t big enough or ready to accept such a big IPO,” said Mr Henin. “Now we will have a new IPO with roughly the same size, it could put some pressure on Asiacell from a liquidity perspective. The Zain IPO will bring some fresh money and opportunities for arbitrage among investors.”
Since the listing of Asiacell, turnover has remained considerably low.
“A lot of the people who invested, were institutionals,” said Sherif Salem, a portfolio manager at Invest AD. “From a liquidity point of view, nobody buys or sells stocks, at least not huge exits, which shows it’s more of long-term investors.”
Zain Iraq plans to tap into wealthy individuals and not to just rely on institutional investors for its public share sale. A sticking point is that many foreigner investors still cannot invest in Iraq because the nation’s bourse is yet to appoint a custodian, where a third party holds equities on behalf of an individual or company.
“From a compliance point of view, a lot of foreign investors don’t really like Iraq. This isn’t because of its fundamentals, but of its issue relating to central custody,” Mr Henin said.
Zain Iraq claimed 48 per cent market share in the country as of June 30, while revenues in the first half were $855m. Asiacell had 36 per cent of Iraq’s mobile subscribers, with an income of $962m over the same period.
“We like the telecoms story in Iraq due to the fact that it’s unpenetrated and they still don’t have data. It’s only voice and text. The government should give some 3G licences in the coming months that will bring some growth,” Mr Henin added.