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Telecom Egypt IPO to Increase Market's Liquidity, Lure Gulf Investors

Cairo (APD) - As details on the Initial Public Offering for 20% in the shares of Telecom Egypt (TE) are becoming known, analysts expect it to improve the liquidity in the Egyptian stock market and lure in more investments from the Gulf region.

The partial privatization of state-owned fixed-line monopoly provider TE is the largest flotation in the history of the Cairo and Alexandria Exchanges (CASE), with 340 million shares being offered in a sale worth LE4.5 billion ($781million), or more.

"The new IPO will undoubtedly increase the number of companies on the market and help boost the market's liquidity, thus enhancing the market's efficiency," said Walaa Hazem, an analyst at Cairo-based HC Securities.

"As for investors, the IPO will help direct their excess cash into the market again," he told APD.

By division into two equal tranches, 50% of the 340 million TE shares in the flotation will be available to individual investors in a public placement while the remaining fifty percent will be offered through a private placement to institutions and high net-worth investors.

For the tranche reserved to institutional investors, the government set the minimum share price at LE 13.30, while it determined a share price ceiling of LE 14.80 per share for the tranche offered to small investors.

Small investors can bid for between 100 and 10,000 shares while institutions' bids would range between a minimum of 1 million shares and a maximum of 17 million shares.

The subscription period for the IPO began Tuesday and is set to close on December 7. The shares will start trading on the Cairo and Alexandria Stock Exchanges (CASE) on December 14.

"I expect the shares offered in the public placement to get 3-4 times oversubscribed, while the private placement could see 10 times oversubscription," opined an analyst at a Cairo-based brokerage, who asked not to be named.

The TE IPO would help attract new investments from the Gulf to flow into the Egyptian stock market. "There has been a huge demand from Gulf investors in the two previous IPOs, which were oil companies. Telecoms will also lure investors from the Gulf," the analyst added.

In last June's offering of a 20% stake in Sidi Krier Petrochemicals Company (SIDPEC), Saudi Arabian Naim Group dominated the private placement by purchasing 7.9 million shares worth LE 524.5 million, or 94% of the 8.4 million shares that were allocated for private placement.

When Egypt launched a 20% IPO in Alexandria Mineral Oil Company (AMOC) in September of this year, Gulf investments at CASE reached LE 1 billion.

Some of the TE shares will be listed in London as Global Depositary Receipts (GDRs). "After the allocation is completed, the government might want to set aside some shares from the private placement and convert them to GDRs," the analyst explained.

An international road show to promote the Telecom Egypt sell-off in US and European financial markets began on Tuesday, TE chairman, Akil Beshir, told Egypt's al-Ahram daily. [TS]

By Eman Wahby, APD Staff Writer in Cairo

© APD (Arab Press Digest) 2005