Zain to offload stake in Iraq unit ‘through’ IPO
Kuwait telco’s stake may fall to 51% from 76%
DUBAI/BAGHDAD, March 3, (RTRS): Kuwait telecom operator Zain may be the sole seller in its Iraqi unit’s IPO which could substantially cut its stake while maintaining its majority control.
Zain Iraq must float a quarter of its shares and list on the Iraq Stock Exchange (ISX) as part of its $1.25 billion licence, as were Iraq’s two other national operators.
The company expects to finalise details of the initial public offering by the end of June, Wael Ghanayem, Zain Iraq’s chief financial and operating officer told Reuters in an emailed response to questions.
If the IPO is fully subscribed, Zain’s stake in Iraq’s No.1 operator and one of its key subsidiaries could fall to 51 percent from 76 percent. It was not clear if Zain Iraq plans to sell more than 25 percent in the IPO.
Proceeds
The share sale may be Iraq’s largest ever, topping No.2 operator Asiacell’s $1.27 billion floatation earlier in February, with the proceeds likely to be used to improve Zain Iraq’s network or repatriated back to Kuwait.
Aside from Zain’s stake, the remaining 24 percent of Zain Iraq is held by “strategic Iraqi investors”, according to a statement from Zain.
Separately, Ghanayem said a foreign shareholder will be the seller in the IPO “rather than the existing Iraqi shareholder”
When asked if Zain was indeed the sole seller, Zain was non-committal.
“Zain is actively working on its offer structure which will be subject to approval of all relevant stakeholders,” the company said in a statement. “The IPO will, in theory, reduce Zain Group’s overall equity in Zain Iraq.”
The subsidiary reported a 6 percent rise in net profit in 2012 to $369 million and accounts for more than a third of group revenue.
NBK Capital, a unit of National Bank of Kuwait, BNP Paribas and Citigroup Inc are advising Zain Iraq on the planned float.
The telco would not comment on what will happen to the IPO proceeds, but analysts say they could be retained in Iraq.
“Zain typically lets its country units run on a stand-alone basis,” said Abhinav Purohit, an analyst at IDC in Dubai.
“There’s talk of new spectrum being sold in Iraq to allow for 3G services and Zain could use some of the IPO income for network upgrades.”
Zain, Asiacell and third operator Korek, a France Telecom affiliate, have nationwide licences but each has a regional stronghold where a core of subscribers is located.
Total revenue and expenses from transactions with related parties amounts to KD 7,708,088 and KD 20,141 respectively.
The Board of Directors of the company recommended not to distribute profits for the year ending Dec 31, 2012 to shareholders registered in the company’s records. Note that these recommendations are subject to approval by the shareholders and the competent
For Zain, this is the central and southern areas of Iraq, so it may seek to boost its presence in under-served areas such as Kurdistan, which is Asiacell’s heartland.
Alternatively, Zain could bring the money back to Kuwait to boost its dividends as it did when it sold some African assets in 2010.
The would be welcomed by the Kharafi family, one of the largest shareholders in Zain and a major family conglomerate in Kuwait which is heavily leveraged.
It previously tried sell a controlling stake in Zain to Etisalat of the United Arab Emirates for $12 billion.
Meanwhile, Zain in Kuwait, received the Kuwait Minister of Communications, Salem Al-Utheina, at the Zain hospitality booth at the Mobile World Congress in Barcelona.
Scott Gegenheimer, Zain Group CEO and Omar Al-Omar, Zain Kuwait CEO, welcomed the Minister to the stand together with a host of senior Zain executives who were present. The parties discussed a number of important issues regarding the latest developments in the telecommunications sector in Kuwait and across the globe.
The total revenue from transactions with related parties is worth KD 4,610,870 and total expenses from transactions with related parties amounts to KD 23,766.
The Board of Directors of the company recommended cash dividends of 6% of the nominal value of the shares 6 fils per share for the fiscal year ending Dec 31, 2012. Sources of distributions: profit for the year and retained earnings Note that these recommendations are subject to approval by the shareholders and the competent authorities.
Through its presence at and participation in the Mobile World Congress, Zain Kuwait seeks to explore and seize opportunities to help it remain one of the most innovative operators in the country and region. Last year, for example, Zain became the first operator in Kuwait to launch a nationwide LTE network.
On the back of Zain Kuwait’s advanced network infrastructure — which has recently been bolstered by further investment in broadband speed and capacity — the operator looks to continue to reinforce its commercial and marketing prowess as part of its overall growth strategy.
Zain’s successful participation at the Mobile World Congress was also highlighted by its live demonstration of the ‘Cloud Campus’ social media-based learning service, in partnership with Hamdan Bin Mohammed e-University (HBMeU) and Global Learning as well as the signing of an agreement between Zain Kuwait and Huawei (a world leading global information and communications technology provider) to launch a first-of-its-kind Joint Innovation Centre which will serve as a research hub for the advancement of communications technology in the Middle East.