JEDDAH, 1 April 2008 — The shares of Etihad Etisalat (Mobily) increased 2.19 percent to SR58.25 yesterday after Shuaa Capital retained its "buy" recommendation on Mobily, revising a target value on the stock to SR78.

Shares in Saudi Telecom Co. and Zain KSA dropped 0.80 percent to SR61.75 and 1.29 percent to SR19 respectively.

Mobily shares were listed on the Tadawul in December 2004, with a public float of 20 percent. Mobily retained a 35 percent interest and six Saudi institutional investors, including the General Organization for Social Insurance (GOSI), had an interest of 45 percent.

To comply with a Royal Decree that by the third year of its listing as a public entity Mobily must increase its public float to 40 percent, the founding shareholders have recently proposed a secondary offering of 100 million shares.

According to the Dubai-based investment bank, all founding shareholders will sell the shares on a pro-rata basis. As a result, Etisalat's stake in Mobily will decrease from 35 percent to 26.3 percent.

Despite news-flow pressure on the stock, Shuaa Capital said Mobily is an ongoing growth story, and recognized that it has become an established brand with critical mass in terms of customer base and a realistic opportunity to grow revenues and expand margins for the foreseeable future.

With the stock down 22 percent year-to-date, all headline risks have been more than reflected in the share price, unlike the operator's achievements and opportunities for growth.

The Shuaa Capital report said, in the next few years Mobily has the opportunity to transition from a pure-play mobile operator to an integrated telecom services provider in the Kingdom, which could prove to be a major boost for the company's growth prospects going forward.

With a penetration rate of only 3 percent and a strong pent-up demand, the broadband market is ripe to take-off. Already, Mobily's "Connect" wireless broadband service, launched in mid-2007, has captured 100,000 subscribers. With the acquisition of Bayanat Al-Oula, Mobily will further expand its operations in the fixed broadband data segment. In addition, Mobily is a partner in the "Saudi National Fiber Network" - a 12,000 km fiber backbone that will cover the country's main cities and is expected to become operational at the end of 2008.

Mobily has proved to be one of the most successful Greenfield mobile operations in the MENA region. In less than three years Mobily has become a solid No. 2 player in Saudi Arabia's mobile market commanding a 37 percent market share with close to 10 million subscribers. However, anticipated competition - including the third licensed mobile player and three new fixed line operators expected to launch operations in Saudi Arabia between 2008 and 2009 - will transform the Saudi Arabian telecom market into a highly competitive landscape with specific implications for Mobily's growth and profitability.

Saudi stocks also surged yesterday. The Tadawul All-Share Index (TASI) edged higher by 83.62 points to 9,134.99 yesterday.

The stock market turnover was over SR5 billion as shares in 81 companies increased yesterday.

Saudi Basic Industries Corp. (SABIC) shares surged 1.26 percent to SR139.75. Tadawul also announced yesterday that bonus shares of SABIC have been deposited into applicable investor's portfolios yesterday by granting one share for every five shares owned by the shareholders registered in the shareholders record by the end of Saturday.

In the insurance sector, shares in Tawuniya and Al-Ahlia Insurance Company dropped. Saudi Fransi Cooperation Insurance Company shares remained unchanged while all other shares were in positive territory yesterday.

The Saudi Stock Exchange also announced that Al-Sagr Cooperative Insurance Company, Trade Union Cooperative Insurance Company and Arabia Insurance Cooperative Company have been added into TASI at the closing price of the shares yesterday.

BMG Saudi Index Rebounds

The BMG Saudi Index reversed its performance yesterday, ending the session in positive territory at 495.4 points, climbing up by 1.1 percent. The market turnover, however, moved downward by 3.9 percent to SR2.2 billion ($580 million).

All of the BMG index sectors moved ahead, with the exception of the telecommunications sector, which declined by 0.8 percent. The best performer in yesterday's session was the agricultural sector, appreciating by 3.2 percent. The insurance sector came in second, advancing by 2.2 percent, and this was followed by the electricity sector, which went up by 1.9 percent. The industrial sector came in next, with a 1.4 percent increase, followed by the banking sector with an increase of 1.2 percent, and the services sector, which appreciated by 0.5 percent. With regard to the performance of shares, 22 shares went up, while five stood still. The Mediterranean and Gulf Insurance and Reinsurance Co. was the best performer, moving up by 9.5 percent to SR34.5 per share. While Saudi Public Transport Co. was the worst performer, falling by 1.8 percent to SR14 per share. Al-Rajhi Bank shares increased by 1.21 percent to SR83.25.