Asiacell IPO, An Expensive Iraqi Customer

Benaw Izzat | Exclusive to iKurd.net

Asiacell, the Kurdish-Iraqi company announced that its landmark share offer (the Offer) is now open for subscription. The company offers 25% of its shares and hopes to raise $1,3 billion.

The timing is surprising while in the meantime Turan al-Mufti, who is the acting Minister of Telecommunications (MoT), gave assurances that the Media and Communications approved finalizing the draft of the 4th license for mobile phone in Iraq.

Potential investors must be aware that there will be another competitor stepping in the Iraqi market very soon. This can hardly help Asiacell to increase its margin; the company will more likely have to fight to keep its market share.

Furthermore the geopolitical tensions between Bagdad and the KRG are at their highest level following the recent military standoff between the two military forces over the disputed territory. President Jalal Talabani (79 years old) also suffered from a brain stroke on December 20th and his succession battle is raising concerns.

But the Iraqi Telecom show must go on and we should consider the investment in Asiacell without taking too much in account the political troubles which always persist in Iraq. At least if they argue, politicians will use their cellphones.

Let’s assume that Asiacell has 10 million customers slightly more than they believe to be optimistic. The proposed valuation of the company is $ 1,3 billion for 25% of the shares in other words $5,2 billion for 100% of the company. Each customer worth $520,- just dividing 5,2 billion by 10 million, that calculation is easy to understand.

Now let s compare the valuation with France Telecom which made a brilliant investment in Korek. In March 2010 when France Telecom CEO’s Stephane Richard took his office, the market capitalization or valuation of the company was EUR 45 billion.

Three years after EUR 22,5 billion are gone in smoke and the valuation for 100% of the company is only EUR 22,5 billion at EUR 8.5 a share (share price January 4th, source Bloomberg). In other word the company lost 50% of its value in the last three years.

On the website of the company it says :

“Present in 33 countries, the Group has a total customer base of 227 million customers at 30 September 2012, including 169 million mobile customers and 15 million broadband internet (ADSL, fibre) customers worldwide.” (source)

To be nice we will consider only the 169 million mobile customers, and the valuation per customer is then EUR 22,5 billion divided by 169 million, so EUR 133 per customer or in USD terms $174,- .

We can already conclude that an Iraqi customer at Asiacell worth $ 520 so three times more than France Telecom’s customer. This could probably reflect a management issue; it is hard to believe that Faruk Mustafa Rasool [Faruk Mala Mustafa] could remain CEO of Asiacell if the valuation of the company had collapsed so much in 3 years.

Finally Rabee Securities, Iraq’s – premier independent brokerage, is acting as sole distributor and selling agent and Melak Iraq, an Iraqi Financial Advisory Firm, is sole adviser to the Company in respect of the Offer (source )

Morgan Stanley and HSBC are no longer book runner since their public announcement to withdraw from this deal in September 24th 2012 (source)

Investors can subscribe by placing a buy order to acquire Shares at at least IQD 22 per share, between the 3rd January and the 2nd February 2013, all you need is an account at an Iraqi broker.

Be brave, good luck, and Happy New Year!

Mrs. Benaw Izzat – a special reporter and senior writer for iKurd.net.

The opinions are those of the writer and do not necessarily represent the views of iKurd.net or its editors.