The Iraqi unit of Kuwaiti telecoms company Zain launched subscriptions for a long-delayed public share offering on Tuesday, fulfilling a pledge made in 2007 when it secured a license to operate in the war-scarred country.
Iraq’s biggest mobile phone service provider, like its two smaller rivals, agreed to float a quarter of its stock and list on the Iraq Stock Exchange (ISX) under the terms of the $1.25 billion license.
Iraq is in dire need of better infrastructure but its unstable politics and persistent sectarian violence have dampened investor appetite and all three companies missed an August 2011 deadline for an initial public share offering.
The local stock market is still tiny. When one of the three telecom companies, the local unit of Qatari telecoms group Ooredoo, finally listed on the ISX in February, it roughly doubled the size of the entire market.
The $1.27 billion sale of the Ooredoo unit, Asiacell, was the first major share issue in Iraq since the U.S.-led invasion that toppled Saddam Hussein in 2003 and was Iraq's largest ever flotation.
Zain Iraq could be even bigger and there are questions over whether the ISX has the scale and sophistication to cope with the additional volume expected to pass through its trading systems.
In 2011, Nomura estimated Zain Iraq’s enterprise value - the value of its equity and debt combined - at $4.9 billion, compared to $4.4 billion for Asiacell.
Zain will set up a joint stock company, Al-Khatem, to house its Iraqi operations and will offer 55.9 million new shares to the public at 1 dinar each, totaling 55.9 million dinars ($48,200). The offer period runs for 30 days, Zain said in a statement to the Kuwaiti bourse.
The offer will pave the way for a much larger, public sale of 25 percent of the company’s shares at a later date, which was not specified.
“This is a procedural step ahead of the future listing, mandated by Zain Iraq's license, which is currently planned in due course,” a Zain spokesman said.
“Zain Iraq is currently an offshore company. We are taking it onshore by creating this joint stock company to be able to list on the Iraqi bourse.”
Zain Iraq made a net profit of $369 million last year on revenue of $1.73 billion. It had half of Iraq's mobile subscribers in 2012, according to Zain's earnings statement, with Asiacell and France Telecom affiliate Korek claiming 36 and 14 percent respectively.