Two-thirds of the shares have been offered exclusively to Saudi nationals in multiples of 10. The other third has been given to the Pensions Fund and the General Organisation for Social Insurance in lieu of debt repayments, and will be put on the market at a later date.

The IPO closes on 6 January and the shares are likely to move to secondary trading in early February. Once on the stock market, the shares will become available to GCC nationals or foreign investors through Saudi equity funds. Saudi Telecom's financial adviser is Gulf International Bank, while Saudi British Bankis acting as the central database manager for the offering.

The launch is expected to be heavily oversubscribed, with the bulk of transactions weighted towards the end of the offer period. 'There has been an effort to persuade investors to stagger their purchases, but I still think that most subscriptions will come in the last few days,' says a banker close to the offer. 'In particular, the big players are more concerned over the deployment of their assets and will watch the market to see what they're likely to get and then apply accordingly.'

The share price is considered by some analysts to be undervalued. 'The grey market over the past month has indicated the sell-on price will be SR 200-250 [$53-67] a share,' says Beshr Bakheet of Bakheet Financial Advisersin Riyadh. 'It's being sold at a premium, which is a positive indication. Saudi Telecom should be robust for the next two years while its monopoly remains intact, and the fair share price will probably be more than SR 170 [$45]. But the jury is still out on long-term profitability after the introduction of GSM competition in 2004.'

The impact of the offer on Saudi Telecom itself has yet to be measured. However, the company can be expected to concentrate more closely on generating dividends for shareholders.

Saudi Telecom is expected to become the largest company traded on the stock market, even eclipsing Saudi Basic Industries Corporation (Sabic), which has been traded since 1983. Anticipation of the IPO has already been affecting the market for several months. 'The All-Shares Index has fallen since May, mainly because of the Iraq situation but also because of the Saudi Telecom selling pressure,' says Bakheet. 'But it should dry out in mid-January and the stock will recover.'

In macro-economic terms, the sale is equally important. The government has stated that revenues from the sale will be used for debt retirement. However, it is not clear whether this will be done immediately, or whether it will be used to retire debt held by the domestic private sector or by government bodies. Even so, the retirement of SR 15,300 million ($4,080 million) of debt will not make a substantial difference. Saudi Arabian public debt now stands at SR 675,000 million ($180,000 million) and will grow by SR 39,000 million ($10,400 million) in 2003 if the government sticks to the budget.