DUBAI, 22 March 2006 — The $659 million initial public offering of the United Arab Emirates’ second telecom operator was oversubscribed by around 167 times, a source close to the transaction said yesterday.
The 2.42 billion dirham ($658.8 million) offering of a 20 percent stake in Emirates Integrated Telecommunications Company (EITC) has attracted $109 billion in bids from investors in the UAE — more than 3 quarters of the country’s gross domestic product.
“The oversubscription rate is around 167 times. A formal announcement is expected tomorrow,” the source said.
The state has placed restrictions on IPOs and postponed a $272 million rights issue by the Dubai Islamic Bank to help shore up prices after the Dubai bourse took a beating yesterday.
The IPO of EITC, also known by its brand name “du”, has in part drained the IPO-starved market over the past 4 weeks as investors cashed share to take part in the IPO, one of the largest in the Gulf region.
Current rules allowing any investor to subscribe to the entire value of an IPO have contributed to heavy oversubscription rates, an official has said.
A 550 million dirham IPO for UAE mortgage lender Tamweel was oversubscribed nearly 500 times and pulled much needed liquidity from stocks in Dubai and Abu Dhabi, which sank last week in a sharp region-wide correction. The government also said it would seek to speed up the return of funds from IPO subscriptions to investors to help ease a liquidity shortage.
The founding shareholders of EITC are offering a 20 percent stake to UAE nationals in the IPO.
The UAE announced last year that it would open up its telecommunications market to competition, ending the virtual monopoly of Emirates Telecommunications Corp (Etisalat).
IPOs in 2004 and 2005 in the Gulf Arab region were on average oversubscribed by more than 70 times. Because governments often insist on conservative valuations, shares on average rise 300 percent on their debuts. Qatar had to deploy riot squads in January to keep order at the region’s largest initial public offering.
The 800 million shares offered in EITC have a par value of one dirham each and will cost investors 3.03 dirhams including offering expenses.
The company said it was applying to list on the Dubai Financial market, where 20 percent of the company’s shares would be open to non-UAE investors.
EITC’s founding shareholders include the UAE Finance Ministry, with a 50 percent stake, Abu Dhabi investment-arm Mubadala Development Company and Emirates Communications and Technology Company which own 25 percent each.
