Saudi Telecom is to offload some 30 per cent of its stock - 20 per cent to Saudi investors through the IPO and 10 per cent to government pension funds in lieu of debt repayment. The stock transferred to the pension funds will be offered to private investors at a later date. Saudi Telecom stock is owned by the government through the Public Investment Fund (PIF). Bahrain-based Gulf International Bankis Saudi Telecom's financial adviser.

Some 90 million shares will be released at a price of SR 170 ($45.3) each and will be sold in multiples of 10.

Economists say the offering will transform the kingdom's stock market, but warn that it will lead to some downward pressure on other share prices. 'Once the Saudi Telecom stock is offloaded, it will account for nearly 15 per cent of total market capitalisation,' says Said al-Sheikh, senior economist at Jeddah-based The National Commercial Bank. 'The new stock will be very popular, but not everybody has cash in hand. A lot of investors will sell their shares in other companies to bring Saudi Telecom into their portfolios.'

Al-Sheikh says the stated share price is very attractive. 'Looking at last year's profits, the company has a PE [price-earnings] ratio of about 14.5 per cent,' he says. 'Given that the average in the Saudi stock market is about 22 per cent, you could see share prices rising to SR 250 [$67.7] to come into line with the market ratio.'

The offering represents the most decisive move yet by the government in its wide programme of privatisation and is the largest sale of public assets since an IPO by Saudi Basic Industries Corporation (Sabic)in 1983. The proposed privatisation of Saudi Arabian Airlinesis moving considerably slower, with bankers now saying it is unlikely to go ahead soon.