Rates slashed in run-up to Saudi Telecom IPO

29 November 2002

Saudi Telecom has announced major reductions to its mobile phone and internet charges and national and international phone tariffs ahead of the launch of an initial public offering (IPO) of 30 per cent of its stock on 17 December. Economists say the company has huge profit potential and that, with a fortnight to go before the $4,000 million offering, there has been downward pressure on the share prices of other companies, as investors offload stock to include Saudi Telecom in their portfolio.

Under plans drawn up by the Posts, Telegraphs & Telephones Ministry, charges for local and international calls for both mobiles and fixed-line networks will be reduced by as much as 50 per cent in the first quarter of 2003, while connection charges for mobile phones will be reduced to SR 100 ($27) from SR 300 ($80). Charges for internet use will be reduced by 25 per cent from 1 February.

The Public Investment Fund is to sell 30 per cent of Saudi Telecom's stock - 20 per cent to Saudi investors through the IPO, which will be launched through the online Tadawul stock exchange, and 10 per cent to government pension funds in lieu of debt repayment. Some 90 million shares will be released at a price of SR 170 ($45.3) each and will be sold in multiples of 10.

'The prices really do look very reasonable, with a price-earnings ratio of 12.75, compared with the average market ratio of 22.4,' says Nahed Taher, senior economist at Jeddah-based National Commercial Bank. 'It shows a lot of room for profit in the market, and we expect the share price to rise to at least SR 280 ($75) within a year.'

Saudi British Bank has been appointed to act as the central database manager for the IPO, but stock can be bought through any of the banks listed on Tadawul. Bahrain-based Gulf International Bank is Saudi Telecom's financial adviser (MEED 18:10:02).

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