RIYADH, 7 January 2003 — The flotation of 30 percent of Saudi Telecom, which closed yesterday, has been oversubscribed, Minister of Finance and National Economy Ibrahim Al-Assaf announced.
The Initial Public Offering (IPO), Saudi Arabia’s largest in two decades, involves the sale of 90 million of the company’s 300 million shares in a deal that will generate more than SR15 billion ($4 billion) for state coffers.
Twenty percent of shares have been put on sale for Saudi citizens while the remaining 10 percent are for two public pension funds. Foreigners were barred from buying.
“The subscription has been more than required,” Al-Assaf told reporters. “Final results will be announced today. There is no intention to open the IPO for companies or mutual funds because shares on offer have been oversubscribed,” he said.
Al-Assaf was commenting on press reports suggesting the response to the IPO had been unsatisfactory and that the government might extend its three-week duration, which officially ended at 1500 GMT.
The response in the first two weeks was slow, as had been expected, but heavyweight investors placed huge offers in the last three days.
The Council of Ministers in early September raised the capital of Saudi Telecom, which has a total monopoly in the local market, from SR12 billion ($3.2 billion) to SR15 billion ($4 billion).
Local banks which received the subscription applications offered soft loans to citizens and interest-free loans to their employees to encourage them to participate in the IPO.
Saudi Telecom posted net profits of SR2.86 billion ($762.4 million) in the first nine months of 2002, down 19.5 percent on profits of SR3.18 billion ($911.5 million) in the previous corresponding period.
Profits in the third quarter of 2002 alone were SR1.554 billion ($414.4 million), up 11 percent on the SR1.4 billion ($373.6 million) recorded in the same period the previous year. The company boasted net profits of about SR3.498 billion ($933 million) in 2001 and SR3.953 billion ($1.054 billion) in 2000.
Total assets grew to SR42.75 billion ($11.4 billion) on Sept. 30, 2002, but economic studies predicted they would grow by another 20 percent once the company is listed on the bourse in a month’s time.
The company has a monopoly over telephone, mobile and Internet services in the Kingdom. Mobile services will be liberalized in 2004 and land lines in 2008. Land telephone lines rose to 3.5 million and mobile lines to five million in a country with a population of 22 million following sharp cuts in service charges.
Saudi Telecom is due to be listed on the Saudi bourse early February and become the second largest in terms of capitalization after market leader Saudi Basic Industries Corp. (SABIC). (AFP)