Dubai Holding seeks fresh cash with Axiom IPO

Dubai Holding could raise as much as $110 million from the public offering of stock in Axiom Telecom.

Abu Dhabi - December 9, 2008: The exterior of an Axiom Telecom store at Abu Dhabi Mall. ( Philip Cheung / The National ) *** Local Caption *** PC0006-AxiomStock.JPG

Dubai Holding, the conglomerate restructuring billions of dirhams of debt, could raise as much as US$110.1 million (Dh404.3m) from the public offering of stock from Axiom Telecom.

Axiom's share sale, expected to go ahead on NASDAQ Dubai on December 9, would be the first initial public offering in the country in two years and follows a recovery in equity markets over the past two months after the sharp sell-off last year.

Axiom will sell 332 million shares at a price range of 80 US cents to $1.15, the company said yesterday. At those rates, Dubai Holding, which has a 40 per cent stake in Axiom, would raise between $76.6m and $110.1m.

Together with the planned public offering this year of stock from Tunisie Telecom, a major operator in Tunisia that is 35 per cent-owned by Dubai Holding, the conglomerate should be able to raise more than $300m, analysts say. Dubai Holding has publicly disclosed debts of more than $9 billion, but along with private bank loans and other instruments, its total debt could be even higher.

Zafar Nazim, an emerging-markets credit analyst at JP Morgan, said that despite Dubai Holding's large assets, the conglomerate had a "weak" cash flow that was hampering its ability to pay off debts.

"Debt maturities in the near term to medium term will likely require the company to get more aggressive with asset sales," he said in a report on November 10.

Faisal al Bannai, the founder and chief executive of Axiom, said Dubai Holding's debt concerns were not a factor in the decision to go public.

Ahmad bin Byat, the chief executive of Dubai Holding, sits on the Axiom board of directors, alongside Abdullatif al Mulla, the chief executive of TECOM Investments, a Dubai Holding subsidiary that runs business parks. Avinash Pangarkar, the TECOM chief financial officer, also sits on the nine-member board.

Dubai Holding has built up a portfolio of telecommunications holdings through TECOM, which is devoted to developing business parks. It also owns 19.5 per cent of du, the UAE's second-largest telecoms operator.

TECOM is owned by Dubai Holding Commercial Operations Group, one of three arms of the sprawling conglomerate. The other two are Dubai International Capital and Dubai Holding Investments Group. Dudai Holding is wholly owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.

The public offering could help to restore confidence in equity markets, which have seen a modest rebound since falling precipitously since late 2008 when the economy began to struggle.

Axiom made a profit of Dh61 million in the first half of the year, up by 10.5 per cent from the same period last year, according to a copy of the flotation prospectus obtained by The National. Its revenue for the first half was Dh3bn.

The company sold about 4.1 million mobile phones last year and 2.2 million in the first half of this year accounting for 67 per cent of all mobile phone sales in the UAE in the period. A portion of the proceeds from the share sale will go towards Axiom's expansion, including the launch of its own branded line of phone accessories in December, Mr al Bannai said.

Axiom aims in the longer term to become a mobile virtual network operator - buying capacity from an existing telecoms operator and reselling it. Mr al Bannai said he was in discussions with du in the UAE and Mobily in Saudi Arabia, as well as with operators in Oman and Jordan.

Axiom shares will be available only to institutional investors at the outset of the public offering.

"We felt, based on all the institutional feedback we received, that there is enough demand that we can generate today from institutions," Mr al Bannai said.

Executives from Axiom will embark on a roadshow in Europe and the US over the next weeks to pitch the company to investors, said Dr Christopher Laing, the managing director and head of MENA for Deutsche Bank, which is the sole global co-ordinator and joint book runner for the public offering.