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Al-Ahram Weekly 20 - 26 July 2000 Issue No. 491 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 20 - 26 July 2000 Issue No. 491
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters Going global
By Niveen Wahish
Orascom Telecom (OT) has completed what has been described as the largest equity offering in Egyptian history. A total of $320 million -- the value of 20.9 per cent of the company's 110 million shares -- were raised successfully as a result of a global offering involving the placement of global depository shares (GDS) listed on the London Stock Exchange (LSE) as well as regular shares listed on the Egyptian Stock Exchange (ESE). Trading of the company's stock on the LSE began on Friday, while trading in Cairo began on Monday. OT is involved in wireless, Internet, pay phone and satellite communications.
EFG-Hermes was the global coordinator for the offering while Shroder Salomon Smith Barney and Credit Suisse First Boston were also part of the arranging team.
The price for the 23 million shares was fixed at LE55 ($16) each, while the value of each global depository share was set at $8. This falls short of the figure of $19-24 the price originally targeted by the company -- but made OT's shares an "attractive" offering as Amr El-Alfi, head of research at Prime Securities, put it. In fact, investors grabbed the shares and the offering closed 1.7 times oversubscribed.
Analysts believe that the company was wise to lower the price to the demands of the market with the result of baiting higher quality institutional buyers. According to El-Alfi, institutions functioning as shareholders prevent strong fluctuations of the share price.
Institutional buyers accounted for 88 per cent of the allocation, 55 per cent of which were Western institutional investors, and 15 per cent of which were Gulf institutions; 18 per cent were Egyptian. Eight per cent of the remaining 12 per cent went to high net worthy investors. Only four per cent went to retail investors.
However, in the long run the lower price is expected to benefit the company. "The low price was meant to guarantee a good after-performance for the share" by rising according to demand, said one investment banker. Since "this is the lowest it could get," El-Alfi agreed that the share price is expected to rise quickly. A report by Prime Securities predicts that "the offering price represents an upside potential of 75 per cent" given the initial valuation of OT shares at $28. In fact the value of OT's GDS rose by four per cent on Friday, the first day it was traded in London.
Analysts are optimistic that the drop in the valuations of telecommunications and information technology companies will not affect the company's share price negatively because "the telecommunications market is recovering globally" said one investment banker.
EL-Alfi also expects OT shares to revitalise the Egyptian stock market and to raise with it the share of MobiNil -- the price of which fluctuated around LE119 last week. However, it remains to be seen how investors will manage in the light of the current liquidity crunch. During the offering, entrepreneurs were selling their stakes in other companies to buy into OT .
The company will use $225 million of the $320 million for investment and regional expansion, while the remaining sum will fund Orascom's acquisition of its 80 per cent stake in Telecel International, a South African telecommunications giant operating 11 GSM licenses across Sub-Saharan Africa. OT's acquisition of Telecel makes it the largest GSM operator in the Middle East and Africa. OT also acquired 38 per cent of Pakistan's MobiLink recently.
The deal gives OT a market capitalisation of $1.76 billion, making it the second largest traded on the Egyptian stock exchange following the Egyptian Company for Mobile Services (MobiNil). OT has a 27 per cent stake in MobiNil worth some $950 million.
