* Price range set at between $10.50 and $13 per GDR
* Bookbuilding, roadshow to be completed on Dec. 11
* TeliaSonera to pay down debt, retain long-term control
By Robin Paxton
ALMATY, Nov 29 Kcell, Kazakhstan's largest
mobile phone operator, expects its stock market debut to raise
up to $650 million for Nordic parent TeliaSonera,
which is floating a 25 percent stake in the shadow of a bumpy
listing by Russian rival MegaFon.
The price range of $10.50-$13.00 per global depositary
receipt for next month's initial public offering (IPO) in London
and Almaty indicates a lower value for Kcell than the price
TeliaSonera paid for a 49 percent stake earlier this year.
Organisers of the listing, who embarked on a roadshow on
Thursday, hope to entice investors with generous dividend
payouts and prospective growth in smartphone and broadband use
in Kazakhstan, the largest economy in ex-Soviet Central Asia.
"There's a lot of room for growth in Kazakhstan before it
catches up with markets like Russia," David de Lanoy Meijer,
managing director and regional head of telecoms at Credit
Suisse, one of the bookrunners for the IPO, said by telephone.
However Stanislav Yudin, analyst with Moscow-based brokerage
Aton, said investor appetite might be lacking after MegaFon's
IPO this week, even though he viewed Kcell's offer price as
relatively cheap for a good asset with little local competition.
"After the MegaFon IPO hoovered up cash from the market, any
half-a-billion-dollar IPO of a mid-sized company is bound to
become more problematic," he said.
Europe has seen a pickup in IPOs since the start of
September, but those working on deals say investors remain
choosy about which to back and are not willing to pay over the
odds amid choppy markets and an uncertain economic outlook.
MegaFon shares priced at the bottom end of its IPO range and
fell by nearly 3 percent on their debut.
Kcell said the indicated price range for its shares would
raise between $525 million and $650 million, and value the
company at between $2.1 billion and $2.6 billion. Booking
investor orders is expected to be completed on Dec. 11.
Even at the high end of the range, Kcell's market
capitalisation would be less than a quarter of the $11.1 billion
valuation of MegaFon , Russia's No. 2 mobile
operator, when it floated on Wednesday.
Telia owns 25 percent of MegaFon after selling shares in the
IPO, which will net it around $1.3 billion. Company spokesman
Salomon Bekele said Telia planned to pay down debt with proceeds
from the Kcell and MegaFon sales.
With the company also looking to sell its Spanish unit,
Yoigo, Telia shareholders are hoping the flood of cash will lead
to extra dividends, such as the 10 billion crown payout in 2008.
But in a recent Reuters interview, Telia President and CEO
Lars Nyberg was cautious about extra payouts.
In a statement on Thursday, Nyberg said Telia would retain
"long-term strategic control" of Kcell. After the IPO, its stake
in Kcell will drop to 61.9 percent.
Sonera Holding BV, the Telia subsidiary which is selling the
stake, will retain an option that will allow it to buy back up
to 10 percent of the GDRs on offer.
GROWING KAZAKH MARKET
Kcell, whose distinctive purple logo appears on billboards
and store fronts in Kazakhstan's main cities, has 12.7 million
subscribers, giving it a market share of nearly 48 percent in an
oil-rich country five times the size of France.
It generated revenues of $1.19 billion and net profit of
$446 million last year. Its margin on earnings before interest,
tax, depreciation and amortisation (EBITDA) was 59.2 percent.
Telia agreed to the Kcell float as part of its acquisition,
completed this year, of a 49 percent stake from state-run fixed
line operator Kazakhtelecom. Telia paid $1.52 billion for this
stake, implying a valuation of $3.1 billion for Kcell.
Asked about the comparatively low IPO valuation, Bekele, the
Telia spokesman, said: "We see the long-term benefit of this
outweighing the short-term valuation."
In a written response to questions, Kcell Chief Executive
Veysel Aral said the company's relationship with Telia, as well
as its cash flow and dividend policy, set it apart from MegaFon.
Kcell has pledged to pay out a minimum 70 percent of net
income in dividends, and also cites the relatively low level of
smartphone penetration in Kazakhstan - less than 10 percent,
compared with nearly 20 percent in Russia - as a selling point.
Ratings agency Fitch raised Kazakhstan's credit profile to
BBB+ on Nov. 20, putting it firmly into investment grade
territory and a notch above Russia.
As well as Credit Suisse, UBS and Kazakh
investment bank Visor Capital have been appointed joint global
coordinators and bookrunners for the IPO. Renaissance Capital is
joint bookrunner and Halyk Finance co-manager of the offer.