RIYADH, 17 October 2004 — Hundreds of Saudis flocked to banks across the Kingdom since early morning yesterday to buy shares in the new Saudi mobile phone company led by the UAE telecom giant Etisalat at the start of the initial public offering (IPO).
“Saudis have become keen to deal in shares and they seize any opportunity to do so. In this case, banks are offering facilities, namely loans up to nine times the value of an investment,” said Akram Lutfi, branch manager of the Arab National Bank, a leading Saudi bank, in Riyadh. “Some men were buying shares on behalf of their children,” he said. Saudi banks insisted that subscribers to Etisalat shares should have accounts in their branches. They provided share subscription forms only to those holding accounts in their branches.
In many branches, subscription forms finished in the early hours of the day and people were asked to come back later in the evening shift.
One bank manager said they had distributed 2,000 forms to each branch. “But they finished in the early hours of the day,” he pointed out. “We’ll ask the main office to provide us with adequate number of forms throughout the days of the IPO,” the official said. The banks refused to give more than two forms to each subscriber in their bid to prevent black marketing. But as a result of too many restrictions, a black market had already cropped up.
The Capital Market Authority announced earlier this month that the IPO in the Etisalat Consortium would last for 10 days and shares would be available to purchase through all banks in Saudi Arabia.
Twenty million shares are on offer at SR50 ($13.3) each, and a limit of 10,000 shares per person has been set in order to allow room for small investors, the first move of its kind in a public offering in the country.
The minimum per person has been set at 10 shares, and the offering is limited to Saudi individuals, with companies barred. The one-billion-riyal offering is expected to be many times oversubscribed, newspapers predicted.
The business daily Al-Eqtisadiah said Etisalat Consortium had requested that its capital be raised from the current SR5 billion ($1.33 billion) to SR7 billion ($1.86 billion).
The Saudi Cabinet in August awarded Etisalat Consortium the second mobile phone license in the Kingdom’s lucrative market after Etisalat made the highest financial bid, offering SR12.21 billion ($3.25 billion).
Twenty percent of the company that will operate the 25-year license must be sold off to the public, and a public offering for another 20 percent is required in the third year of operation.
An Arab industry report has predicted that revenues in Saudi Arabia’s GSM market will soar to $7.9 billion by 2007 on the back of the partial privatization of state-owned giant Saudi Telecom and increased competition.
Although Riyadh has opened up the mobile sector to competition, Saudi Telecom will retain a monopoly over land lines until 2008. Saudi Telecom plans to cut its charges within the next two months.