Investors were rushing to banks in the United Arab Emirates on Saturday as the country's second telecom operator opened a 2.42 billion dirham ($658.8 million) initial public offering, which is expected to generate strong demand in an IPO-starved market.
The founding shareholders of Emirates Integrated Telecommunications Company (EITC) are offering a 20 percent stake to UAE nationals in the IPO.
The UAE announced last year that it would open up its telecommunications market to competition, ending the virtual monopoly of Emirates Telecommunications Corp (Etisalat).
Despite an equity boom in the Gulf Arab region, IPOs are relatively scarce and generate huge demand, sometimes leading to scuffles among investors desperate to buy shares. EFG-Hermes, the lead manager for the EITC IPO, has printed hundreds of thousands of application forms.
"Our branches are overwhelmed," said a banker at Abu Dhabi Commercial Bank, one of the receiving banks.
"The parking lots are full of cars and people are waiting in long lines."
He said he did not expect the same rush that was triggered by an IPO last year in energy company Dana Gas, which was open to investors from across the Gulf and was oversubscribed more than 130 times, causing scuffles in many local banks.
"(The EITC IPO) has more demand from the UAE because it is only open to the UAE and local investors feel they may get a better allocation," he said. "We're expecting a huge number of subscribers."
IPOs in 2004 and 2005 in the Gulf Arab region were on average oversubscribed by more than 70 times. Because governments often insist on conservative valuations, shares on average rise 300 percent on their debuts. Qatar had to deploy riot squads in January to keep order at the region's largest initial public offering.
The 800 million shares offered in EITC, also known by its brand name "du", have a par value of one dirham each and will cost investors 3.03 dirhams including offering expenses. The company said it was applying to list on the Dubai Financial market, where 20 percent of the company's shares would be open to non-UAE investors.
State-controlled Etisalat has been the sole provider of telecommunications services in most of the country, although a few thousand homes and offices in Dubai are served by niche operator TECOM, which has a stake in EITC.
EITC's licence gives it the right to operate mobile and fixed networks across the country. The company said last month that it had 19,100 business and residential fixed line customers in Dubai and was also providing satellite broadcasting services to several media companies.
EITC's founding shareholders include the UAE finance ministry, with a 50 percent stake, Abu Dhabi investment-arm Mubadala Development Company and Emirates Communications and Technology Company which own 25 percent each.
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