Zain Iraq Plans IPO by July After $1.3 Billion Asiacell Sale

Zain Iraq plans to sell shares by the end of the first half as the nation’s biggest mobile-phone operator follows a $1.3 billion initial public offering by Qatar Telecom QSC’s Iraqi unit.

Zain Iraq, a unit of Kuwait’s Mobile Telecommunications Co., will list 25 percent of its shares on the Iraq Stock Exchange by the end of June, Chief Financial Officer Wael Ghanayem said in an interview in Baghdad yesterday. “There will be a big demand for our shares and it will be very attractive.”

The share sale plan follows Asiacell Communications PJSC, majority owned by Qatar Telecom, which started trading in Baghdad this month after the largest IPO in the Middle East since 2008. Zain Iraq has hired Citigroup Inc., National Bank of Kuwait and BNP Paribas SA as advisers for the offering, said Ghanayem, who is also the company’s chief operating officer.

Asiacell’s share sale was fully subscribed and doubled the market value of the country’s stock exchange from $4.66 billion last year, according to Taha Ahmed Abdul-Salam al-Rubaye, the bourse chief executive officer. Korek Telecom, part-owned by France Telecom SA, must also sell 25 percent of its shares on the bourse to comply with it license requirement.

Zain Iraq is in the final stages to convert into a shareholding company, Ghanayem said. The company’s profit climbed 6 percent in 2012 to $369 million and it expects “double-digit” growth this year, he said.

Procedural Hurdles

Ahmed al-Omari, trustee board member of Iraq’s Communication and Media Commission, said in a Feb. 12 interview that Zain Iraq’s listing won’t happen before the second half of the year due to delays in registering the company in Iraq.

“A more realistic estimate is Zain will be positioned to list about six months after they convert to a joint stock company,” Geoffrey Batt, managing director of the $44 million Euphrates Iraq Fund, said by phone. “At the moment, they need to overcome too many procedural hurdles to list by June 30.”

Iraq, which overtook Iran in June as the largest producer behind Saudi Arabia in the Organization of Petroleum Exporting Countries, is starting to attract investments nine years after the U.S.-led invasion that toppled Saddam Hussein. Still, bouts of violence and sectarian tension have hindered the recovery.

The stock exchange opened in 2004 after suspending operations during the invasion, and prices were updated manually on a white board before electronic trading started in 2009. Banks have the largest market value among 73 listed companies, according to the latest data from the bourse.

Attractive Market

A successful IPO for Zain Iraq would increase the Iraq Stock Exchange’s market capitalization by at least $5 billion and make it a “difficult market for institutional investors to ignore,” Batt said.

The telecommunications industry in Iraq will continue to grow, albeit at a slower pace, after registering a rate of 12 percent last year compared with 17 percent in 2009, Ghanayem said. The mobile-phone penetration rate in Iraq is at about 80 percent compared with neighboring countries where it ranges from 90 percent to 130 percent, he said.

Zain Iraq has 50 percent market share after subscribers grew 10 percent to 13.7 million last year, Ghanayem said. The company plans to invest 15 percent of its 2013 revenue on expanding and modernizing its network, he added.

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