The Iraq unit of the Kuwaiti telecoms company Zain has moved a step closer to launching its mandatory initial public offering (IPO).
It has established a new holding company, Al-Khatem Telecommunications, in Iraq through which it will list 25 per cent of its shares on the Iraq Stock Exchange (ISX) towards the end of the year.
Only Iraqi-domiciled joint-stock companies can list on the ISX. Al-Khatem floated 55.9 million shares on June 4 for one Iraqi dinar per share. The subscription period will last 30 days.
Once this IPO is complete, the company can proceed with the 25 per cent share offering for Zain Iraq. "After completing this constituent public subscription process, and the fulfilment of other regulatory requirements, Al-Khatem expects to receive a final approval for incorporation from the Companies Registration Department.
This will allow Al-Khatem to commence the necessary steps towards a subsequent offer of 25 per cent of its share capital on the ISX, subject to approval by the telecom and capital market regulatory authorities in Iraq," the company said.
Administrative and bureaucratic processes had been holding the company back from launching its IPO, according to senior officials.
Zain's will be the second telecom listing on the ISX. The first, a 25 per cent share offering from the mobile operator Asiacell, majority owned by Qatar's Ooredoo back in Febrary raised US$1.24 billion.
"If you look at our growth in Iraq, we believe the IPO will be attractive and there will be good demand for the stock," said Wael Ghanayem, the chief financial and operating officer at Zain Iraq. "This is the second IPO, people are more educated about the processes."
Zain Iraq has hired Citigroup, the National Bank of Kuwait and BNP Paribas as advisers for the offering.
The company, with about 14 million subscribers, recorded a profit of $369 million last year, up 6 per cent from 2011.
Mobile penetration in Iraq is about 82 per cent. In 2009, the market value of the telecoms sector in the country grew by 19 per cent, but last year growth slowed down to 12 per cent. All three telecoms operators offer second-generation (2G) services. There are currently no 3G services in the country.
"In theory, the Iraqi telecoms market offers good growth prospects. The lack of fixed-line infrastructure creates an opportunity for mobile operators to provide an alternative," said Matthew Reed, the principal analyst at Informa Telecoms & Media. "The Zain Iraq IPO will be interesting as a test of whether investor sentiment about the Iraqi telecoms market - and perhaps about Iraq more generally remains as bullish as it was for the Asiacell IPO."
