January 7, 2008 / 11:30 AM / 12 years ago

UPDATE 2-Saudi Zain says may increase size of IPO

(Adds details, quotes, background)

By Souhail Karam

RIYADH, Jan 7 Reuters) - The Saudi affiliate of Mobile Telecommunications Co (Zain) (ZAIN.KW) said it may sell more than the originally planned 40 percent stake in an initial public offering that could take place as early as next month.

“The IPO stake sale might increase since the Saudi government encourages broader participation,” Marwan al-Ahmadi, chief executive of Zain Saudi Arabia, told reporters in Riyadh on Monday, though he said any increase would be “marginal”. He declined to be more specific.

Owners of Saudi Arabia’s third mobile telephone operator had planned to sell 560 million shares to the public in the first quarter, representing 40 percent of the firm’s capital.

Additional 5 percent stakes would be sold to two state-owned pension funds, General Organisation for Social Insurance and the Public Pension Agency.

The Saudi-controlled Asharq al-Awsat newspaper reported last month that an unnamed government institution had declined to buy the shares because it did not fit its investment strategy, but al-Ahmadi said: “We have not been officially notified of any withdrawal.”

He added that the IPO may start next month.

Zain owns 25 percent of the company, which last year paid $6.11 billion to win a licence. The remaining 25 percent stake is held by private Saudi investors.

Zain Saudi Arabia is looking to raise about 7 billion riyals ($1.9 billion) from the sale of the stakes in the IPO and to the two state-owned pension funds, Ahmadi told Reuters in November.

The company plans to launch operations in 2008 in a market which has already reached 100 percent mobile penetration rate. “The fair market share for us should be 33 percent,” Ahmadi said, without saying when it plans to attain that objective.

“The 100 percent penetration rate is not a source of concern for us since many users hold additional subscriptions that are not active,” he told Reuters.

Zain Saudi Arabia has awarded Nokia Siemens Networks an order worth $935 million to build second- and third-generation mobile networks which Ahmadi says may serve 8 million users.

Zain will compete with state-controlled Saudi Telecom Co (7010.SE) and Etihad Etisalat 7020.SE, an affiliate of Emirates Telecommunications Corp ETEL.AD (Etisalat).

Telecom companies in Saudi Arabia, the world’s biggest oil exporter, may be generating revenue of 55 billion riyals in 2010, up 38 percent from 2006, the kingdom’s telecom minister said in May. (Writing by Souhail Karam; Editing by David Holmes)

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