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RINGING UP AN INTEREST: Iraq to launch major telecom IPO

Telecom listing to be Iraq’s largest and first major IPO since a U.S. led invasion toppled Saddam Hussein in 2003. Hass investor confidence finally returned to Iraq after years of war, political instability and financial sanctions

January 6, 2013 8:06 by

Based on a 22 dinar IPO price, Asiacell shares are likely to be valued at about 9.6 times expected 2012 earnings, according to Reuters calculations. That may not be seen by investors as generous – the valuation is similar to that of Qatar Telecom in Qatar’s better developed, less risky stock market – but it could be justified by Iraq’s long-term growth prospects.




Asicell’s IPO may not go as smoothly as the long-term economic outlook suggests, however. The Iraqi stock market’s current capitalisation is only about 5.6 trillion dinars ($4.8 billion), so Asiacell’s float may not be easy to absorb in one gulp. All three telecommunications firms combined are expected to roughly double the market’s capitalisation.


Furthermore, a mass share-owning culture has yet to develop in Iraq, where many people – mindful of the country’s troubled political history – prefer to keep their money in liquid cash or bank deposits.


“I do not invest my money in the bourse because there is no profit expected. Most of the companies registered are not profitable companies,” said Akram Mohammed, a 30 year-old engineer in Baghdad. He keeps his savings in a bank.


Foreign investors, whose ownership of listed shares rose to 19 percent at the end of 2011 from 3 percent in 2008, might be expected to buy shares in Asiacell.


But this hope has been complicated after two international banks, Morgan Stanley and HSBC, late last year cancelled plans to help manage the IPO. The banks declined to comment on their reasons.


Baghdad-based broker Rabee Securities has been left as sole distributor and selling agent for the shares. Without the involvement of foreign banks, it may be harder to drum up international interest and to arrange share purchases in a currency which is not internationally traded.


Abdulsalam insisted that Asiacell’s IPO would attract substantial foreign interest, however, and that it would help to encourage more foreign equity funds to enter Iraq. Five foreign funds currently operate on the Baghdad exchange.


“A lot of investors, whether Iraqis or non-Iraqis, send us messages saying ‘we are a portfolio or a fund company and we want new shares, we want new companies’,” he said.


“Can you imagine how much passion there will be? There is a passion and a thirst” for shares in the Iraqi telecommunications companies, he added.


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