* Saudi Telecom affiliate Viva Kuwait completed IPO in 2008
* Viva yet to list on Kuwait bourse, won't say why
* New share issue expected as losses mount
* Competition adds pressure on margins
By Matt Smith
DUBAI, Nov 15 (Reuters) - Loss-making Viva Kuwait has yet to join its local bourse more than four years after its initial public offering and the telecommunications operator's listing could be further delayed as it may first need to issue new shares to shore up its balance sheet.
Convincing minority shareholders to pump in more cash to the Saudi Telecom Co (STC) affiliate when their original investment has been off-limits for so long may be a tough sell.
Viva, which competes with Zain and Qatar Telecom subsidiary Wataniya, raised 25 million Kuwaiti dinars ($88.57 million) from selling half its shares to Kuwaiti nationals in an IPO in September 2008, launching services later that year.
The company refused to explain the delay or state when it would list on Kuwait's ailing stock exchange when asked by Reuters, only saying it made an application to the regulator, Capital Market Authority (CMA), in February 2012. Saudi Telecom and the CMA declined to comment.
The dismal performance of the bourse is a likely factor. The main share index hit an eight-year low this month, but the firm's finances are a bigger consideration.
At the end of 2011, Viva had accumulated losses of 68.5 million dinars and 49.9 million dinars of capital, according to its annual report, which also said Viva would hold a special shareholders meeting in 2012 after losses topped 75 percent of capital to comply with local law.
That meeting has yet to happen, but its probable remit will be to approve a capital cut to alleviate the accumulated losses, a common practice in the Gulf.
"It will be difficult to get a listing with negative equity," said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain. "The only option available is to go for a rights issue to recapitalise the company."
The company would likely issue new shares, offering these to shareholders on a pro rata basis, meaning they could either pay more money into the company or have their holdings diluted.
STC would probably meet any shortfall, meaning its stake would increase from 26 percent at present. Zain did something similar earlier this year with loss-making affiliate Zain Saudi .
In 2008, Viva's IPO was 3.4 times oversubscribed with 916,000 investors each receiving 274 shares at 0.105 dinars per share, which may explain why shareholders have not been more vociferous in complaining about the listing delay.
"The individual investment is peanuts. They've almost forgotten about it," said Naser al-Nafisi, general manager for Al Joman Center for Economic Consultancy in Kuwait, adding Viva would likely restructure its capital in the first half of 2013.
Prior to the IPO, STC - the Gulf's No.1 telecommunications operator - paid 3.42 billion riyals ($911.93 million) for its Viva stake, including the Kuwaiti firm's licence.
"The shares look undervalued in terms of the IPO price," said Sarwar. 'Ideally, the amount of capital raised during the IPO should have been higher. If and when the company increases the share capital the valuation metrics will look different."
Viva may have been undervalued, but a worsening sector outlook could make investors pause.
"This year has been difficult for Kuwait operators. It's generally one of the more lucrative markets in the region with a rapid take-up of data, but a variety of factors have combined to make it a tougher market recently," said Nadine Ghobrial, EFG-Hermes telecoms analyst.
"Changes to government fee structures has impacted margins, the sector still lacks an independent regulator and competition intensity has increased."
($1 = 0.2823 Kuwaiti dinars)
Reporting by Matt Smith; Editing by Matt Driskill