DUBAI Zain Iraq expects wealthy individuals to be the largest subscriber group in the telecom operator's 2014 IPO and looks to raise more than $1 billion, its chief financial officer told Reuters on Sunday.
The company, a unit of Kuwait's Zain (ZAIN.KW), and its two rival national mobile operators, Asiacell TASC.ISX and Korek, were required to float a quarter of their shares and list on the Iraq Stock Exchange (ISX) as part of their licenses, but all missed a 2011 deadline to do so.
Asiacell - majority-owned by Qatar's Ooredoo ORDS.QA - joined the ISX in February this year after raising $1.27 billion in a public share sale that was Iraq's largest ever. Zain Iraq aims to float in the first half of 2014.
The initial public offering will likely raise "north of $1 billion", Wael Ghanayem, chief financial and operating officer, told Reuters.
The telecom IPOs are Iraq's first major listings since the U.S.-led invasion that toppled Saddam Hussein in 2003.
But Asiacell's flotation has done little to boost activity on the ISX, trading a median of 6.97 million shares daily, according to Reuters' calculations. The stock has fallen 4.7 percent since listing.
On Thursday, 407.2 million shares worth 590.4 million dinars ($507,700) changed hands on the bourse, while the market's total capitalization was $9.89 billion as of August 31. Asiacell accounted for almost half of the bourse's value.
Zain Iraq's Ghanayem expects the IPO to attract high net worth investors from Iraq and abroad, followed by Iraqi and foreign institutions and then local retail investors.
Funds from Gulf Cooperation Council (GCC) countries - Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the United Arab Emirates - would probably make up the bulk of foreign institutional demand for the IPO, Ghanayem said.
Zain Iraq claimed 48 percent of Iraq's mobile subscribers as of June 30 and its half-year revenue was $855 million, while Asiacell's 36 percent market share generated earnings of $962 million over the same period.
Asiacell's headquarters are in Sulaymaniyah in the Kurdish north of Iraq, while Zain Iraq's core business is centered on the less stable regions of Baghdad and southern Iraq.
Zain owns 76 percent of Zain Iraq and previously stated it would be the sole seller in the IPO, but Ghanayem said the exact offer structure had yet to be decided.
"We could change this from being a pure secondary sale into maybe including a primary component as well," he said. "The business is generating cash, but ... there's a need to invest additional capital expenditure, so we may elect to have a primary component."
Selling new shares in the IPO could make it more attractive to potential investors, analysts say, because these proceeds would remain with Zain Iraq.
"We will be engaging in discussion with the regulators to give us feedback on what we should do, so the offer structure should be nailed down by the end of this year," added Ghanayem.
Iraq is the most important market for Zain in terms of customers and earnings, accounting for 31 percent of the company's subscribers and 40 percent of revenue in the first half of 2013. ($1 = 1163.0000 Iraqi dinars)
(Reporting by Matt Smith; Editing by Ruth Pitchford)