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BAGHDAD/DUBAI: Qatar Telecom (Qtel) used Iraqi unit Asiacell’s $1.27bn share sale, Iraq’s largest flotation, to raise its stake to 64.1 percent in a vote of confidence in a country recovering from years of war and economic sanctions.
As the first big equity sale since a US-led invasion of 2003 toppled Saddam Hussein, the listing of Iraq’s No. 2 telecom operator was seen as a test of investor appetite, with other local telecoms firms also required to float as a condition of their operating licences.
The initial verdict seems positive. Asiacell shareholders, led by managing director Faruq Mustafa Rasool, sold 67.5 billion shares in the offer, a quarter of its share capital, at 22 dinars apiece and it was fully subscribed by Sunday’s close.
A day later, Asiacell shares ended 5.7 percent higher at 23.25 dinars on the Iraq Stock Exchange (ISX).
Some 70 percent of the public offer went to foreign investors, including Qtel.
Iraq did not have a mobile phone market under Saddam Hussein and the sector has blossomed since his fall to become the country’s fastest growing industry after oil.
With the economy forecast to grow 10 percent a year over the next three years, the potential for mobile phone operators is great, although there are also security and logistical problems.
Qtel said yesterday it had raised its stake in Asiacell to 64.1 percent — from 53.9 percent previously — implying it may have accounted for more than a third of the shares sold in the public offer.
Qtel agreed in June to pay $1.5bn to double its holding in Asiacell to 60 percent as part of a broader strategy to tighten its control over its foreign units, which span the Middle East, Asia and Africa.
Part of that deal — a 6.1 percent stake — was subject to regulatory approval, which Qtel has now received, it said.
That means ahead of Asiacell’s bourse debut, Iraqi holdings in Asiacell fell to 28.6 percent from 46.1 percent, according to Reuters calculations. Yet a key aim of Asiacell’s flotation was to return some of the country’s wealth to its people.
“The stock is unlikely to be very liquid considering that a large part of the share sale was bought by foreign direct investors who are likely to keep the shares for a long time,” said Hassan Aldahan, chairman of Baghdad-based investment company Bain Alnahrain.
About 32.9 million Asiacell shares changed hands on the ISX on Monday. This trading was worth 759.17m dinars ($651,600), with the bourse’s total turnover $4.02m. That compares with a January daily bourse average of $4.59m.
Asiacell’s offer valued the company at about $4.95bn and its listing roughly doubles the bourse’s market value.
“This marks the birth of the ISX as a real stock market,” said Bartle Bull, portfolio manager of Northern Gulf Partners’ Iraq equity fund in New York. “Iraq has a far more open, dynamic business culture than many Gulf countries. The Iraqis are smarter and tougher. We should see some more companies coming.”
Asiacell’s bigger domestic rival Zain Iraq, a subsidiary of Kuwait’s Zain, as well as France Telecom affiliate Korek, are also required to offer a quarter of their shares under the terms of their operating licences, having missed an initial August 2011 deadline to do so.
“The big cell phone companies are the bellwether stocks in any market, they’re so well correlated to the overall GDP story,” said Bull, who invested about 10-20 percent of his fund’s money in the Asiacell offering.
Qtel has announced the successful closing of the previously announced pricing of its $1bn senior unsecured notes to be issued by its wholly owned subsidiary, Qtel International Finance Limited under the Global Medium Term Note Programme established on the Irish Stock Exchange. The Notes will be unconditionally and irrevocably guaranteed by Qtel, a Qatar Exchange filing noted.
The most recent issuances were issued on January 31, 2013: a $500m 15-year notes with a coupon of 3.875 percent, due January 31, 2028 and $500m 30-year Notes with a coupon of 4.500 percent, due January31, 2043.
The transaction was priced at a margin of 2.15 percent over the 10 year US Treasury rate for the 15-year Notes and at 1.625 percent for 30-year Notes.
Net proceeds from the sale of the Notes will be used for Qtel’s general corporate purposes, including refinancing existing indebtedness.