RIYADH, 18 December 2002 — Saudi Arabia yesterday launched a 15.3 billion riyal ($4 billion) public offering of its sole telecoms provider to Saudis in its biggest partial privatization in years aimed at easing the state’s debt burden.
The government is floating 90 million shares, or 30 percent, of Saudi Telecom Company (STC) — 60 million shares to Saudi citizens and 30 million shares to a pension fund and a social insurance fund — priced at 170 riyals per share.
The response to this multibillion-riyal share flotation was “modest,” according to bankers contacted by Arab News yesterday evening. They added that those who came to banks to purchase shares were not fully aware of the procedures.
They attributed the slow response to the timing of the flotation, coming as it does in the wake of the Eid Al-Fitr holiday. This is traditionally a period when people save money. It is also the middle of the month, when people usually look forward to their end-of-month salary.
The bankers, however, are hopeful that the people will rush during the last days of the initial public offering.
“Today, the shares went on offer for Saudi nationals only,” said Alhassan Goussous, head of investment services at Saudi British Bank, the lead manager for the IPO that ends Jan. 6. “Banks have started to accept requests from the public and to enter them into the system.”
The stock, which will be sold in multiples of 10, is expected to be listed on the Saudi bourse by Feb. 15. Once listed, the shares will be open directly to Gulf Arab nationals and indirectly to foreigners via Saudi equity funds.
Only individuals and firms from the Kingdom and its Gulf Arab neighbors are allowed to trade directly in the market. Bankers involved with the issue said the STC share was undervalued and expected demand to be high. A report by HSBC, the foreign partner in Saudi British Bank, expected STC to become the largest firm on the stock exchange with a market capitalization of 51 billion riyals, or 16 percent of total market capitalization, followed by industrial firm SABIC with a market value of 44 billion riyals.
Saudi officials have said proceeds from the government’s slow-moving privatization would ease the public debt, estimated at around 600 billion riyals, nearly the Kingdom’s annual gross domestic product. The STC flotation is required by a telecoms law passed in 2002 under efforts to push forward long-stalled privatization plans.
STC, set up in 1998, has 4.5 million mobile phone subscribers and 3.3 million fixed lines. It made a net profit of 2.86 billion riyals for the first nine months of 2002 and posted a 12 percent fall in 2001 net profit to SR3.47 billion.
Economists say the sale of a host of state holdings in various monopolies, including some of the major firms listed on the Saudi stock market, can generate up to $50 billion. Bankers expect Saudi Electricity Co to be privatized next while loss-making Saudi Arabian Airlines will need at least three years before it would be offered to the public.
