Iraq telecoms IPO: turning point?
Iraqi telecoms firm Asiacell’s $1.3bn initial public offering is the Middle East’s largest in four years.
There are also hopes the issue will mark a turning point in the history of post-Saddam Iraq, with the authorities seeking to broaden public share ownership throughout the country. But the buzz around the landmark event has not travelled far.
The sole book-runner, Rabee Securities, says the shares on offer have already been placed, mainly to Iraqi and Gulf investors. Strong support from “friends and family” of Asiacell’s founders in the Kurdish city of Suleymaniya in Northern Iraq is helping propel demand.
Qtel, which owns a 54 per cent stake in the second largest telecoms firm in Iraq, wants to increase its stake to around 60 per cent, which has spurred related demand in Doha as Qatari investors come in on Qtel’s coat-tails.
Other Gulf entities, such as investment houses linked to the state, are expressing strong demand in the firm, which has 43 per cent market share with around 10m subscribers, says Shwan Taha of Rabee.
But the deal feels like a regional affair. When this became clear, original joint book-runners Morgan Stanley and then HSBC pulled out.
One regional banker also says the logistical difficulties of signing up for the issue – wiring money into Iraq and setting up local accounts – has put many investors off.
The political backdrop is also worrying for risk averse investors. Sectarian and nationalist tensions are increasing within the country amid rising complaints about a new authoritarianism in Baghdad.
One fault line deepening recently has pitted the central government and the Kurdish regional government over the latter’s pursuit of an independent energy policy. In terms of pricing, the market is divided. One banker says the deal – at six times Ebitda – is overly expensive. But others are filling their boots.
Sebastien Henin of The National Investor in Abu Dhabi says the issue is sparking demand among his peers, who like Asiacell’s strong growth story. “There just aren’t enough opportunities now, and there is strong demand for emerging markets exposure like this,” he said.
Domestically, too, Taha hopes that the issue will mark Iraq’s BG moment, harking back to Margaret Thatcher’s privatisation of British Gas. That landmark deal in the roaring ‘80s was boosted by the famous “Tell Sid” advertising campaign.
The stock exchange and Asiacell have also been promoting the share sale via public information-style ads, describing in layman terms how to subscribe before the February 2 close.
Rabee has partnered with a bank to sell shares across the country, and Taha describes his Suleymaniya branch as “a zoo,” so relentless has been the demand to purchase shares.
But other Iraqis are more lukewarm. Alaa Tayeh, a businessman from the southern city of Basra, is a typical member of the entrepreneurial middle class, importing cars and generators, as well as owning a hotel. He is not interested in reinvesting his profits into the stock market. “I don’t believe in it,” he says. “I want something in my hand, a car or gold.”
An Iraqi entrepreneur based in Dubai, despite his avowed determination to invest in his home country, says he feels unsure about growing political risk. “It’s just too unstable now,” he says. “The government looks precarious and I just don’t feel patriotic about this, even though it is a brilliant business.”