* 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 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
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)