JEDDAH, 2 December 2004 — Saudi Arabia yesterday announced the establishment of Ettihad Etisalat as a Saudi joint-stock company with a capital of SR5 billion. A consortium led by UAE telecom giant Etisalat that won the Kingdom’s second mobile license set up the company.
Commerce and Industry Minister Dr. Hashem Yamani, who made the announcement, said the Riyadh-based company would have a capital of SR5 billion divided into 100 million shares, each with a nominal value of SR50. “The company will provide telecom services as per the Kingdom’s rules and regulations,” the minister said. “It will provide mobile phone services as per the license(s) issued by the Telecommunications and Information Technology Commission (TITC),” the Saudi Press Agency quoted Yamani as saying.
Ettihad Etisalat, which is established for 99 years, is licensed to carry out various activities related operating the Kingdom’s second GSM, including financing, designing, construction, maintenance and supply of equipment and materials. The license could be renewed a year before its expiry.
The company will have a 10-member board of directors appointed by the general assembly for three years. However, the term of the first board will be five years. Ettihad Etisalat has disclosed its plan to raise its capital by 40 percent to SR7 billion.
Ettihad Etisalat’s initial public offering last month was oversubscribed 51 times, reaching a whooping SR51 billion ($13.6 billion). “This is the biggest IPO in the history of the Saudi stock market,” said Issa Al-Issa, chief executive of Samba Financial Group, which managed the IPO.
Twenty million shares were on offer at SR50 ($13.3) each, totaling SR1 billion ($266.6 million). But the number of applicants reached a staggering 4.28 million, he said. The minimum per person was set at 10 shares, and the offering was limited to Saudi individuals.
The Cabinet in August awarded Etisalat Consortium the license in the Kingdom’s lucrative market after it made the highest bid of SR12.21 billion ($3.25 billion). Twenty percent of the company must be sold off to the public, and a public offering for another 20 percent is required in the third year of operation.
Fayyaz Siddiqui, the consortium’s chief financial officer, said 4.28 million investors applied for the shares during the IPO that closed on Oct. 25. Investors will receive just four or 4.6 shares each because of the strong demand.
Demand for shares in the new Saudi mobile company was so great that scuffles broke out at banks, and newspapers reported subscription forms were being sold on the black market. Traders attributed the buying frenzy to the strong performance of the Saudi bourse over the last 18 months, underpinned by record oil prices, healthy corporate results and a surge of investor liquidity.
Most expect the 50-riyal Ettihad Etisalat shares to soar in value. “Expectations are that they will reach SR200 in the short term. I think they will be trading at SR300 in one month,” said Abdulwahab Abu Dahesh, a senior economist at Riyad Bank.
Etisalat’s move into Saudi Arabia ends the monopoly of majority state-owned Saudi Telecom Company, the Kingdom’s second-largest listed company and one of the most heavily traded on the bourse. STC remains for now the only landline operator in the Kingdom.