Zain Bahrain initial public offering coming in September

Zain Bahrain to be the first company in four years to go public in the country.

Zain Bahrain is offering 48 million shares, or 15 per cent of the company, at 0.19 Bahraini dinars (Dh1.85) per share. Salah Malkawi for The National
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The telecoms provider Zain Bahrain said yesterday would issue its initial public offering in the country next month.

Aimed at raising US$24 million, the IPO will be Bahrain’s first listing since 2010. Zain had 768,000 customers in the country at the end of the second quarter, down from 774,000 at the end of first quarter in a highly competitive telecoms market.

Zain Bahrain primarily provides mobile phone services and internet services in the country, which has two other mobile service providers, Batelco and Viva Bahrain. Viva is owned by the Saudi Telecom Company and entered Bahrain in 2010. There are about eight more companies that provide internet services.

In its IPO, Zain Bahrain is offering 48 million shares, or 15 per cent of the company, at 0.19 Bahraini dinars (Dh1.85) per share. The offering will open on September 2 and will continue until September 16. The allotment basis will be announced two days later, the company said.

Bahraini institutional and retail investors, along with institutional investors from rest of the Arabian Gulf region, can subscribe.

“The capital expenditure is aimed at upgrading network infrastructure to improve indoor coverage, expanding capacity to meet high bandwidth demands, and introducing smart features for smartphones,” wrote the investment bank EFG Hermes.

Zain Bahrain, which gained a licence to operate in the country in 2003, was expected to sell the required 15 per cent of its shares in an IPO in 2008. The plans were shelved at that time. Kuwait’s Zain Group owns 63 per cent in Zain Bahrain, according to its latest financial statement.

The investment banking units of Gulf International Bank and National Bank of Kuwait will run the IPO offering, according to Reuters.

While low liquidity in the Bahraini bourse is something all companies have to deal with, it will eventually move up if more IPOs are listed at the correct valuation and more companies are listed, said an analyst who declined to be named.

“[Zain Bahrain’s] is not a very big IPO; at less than 10 million Bahraini dinars being raised it is not significant at the Zain Group level,” the analyst said. “The IPO is done mainly to comply with the license terms.”

He said he expected another IPO in the bourse in the next 12 months, declining to give further details.

“It is important that the companies do well post-IPOs to encourage more companies to list and investors to invest,” he said.

The overall telecoms market in Bahrain is saturated, with Batelco and Zain enduring competitive pricing over the past few quarters. Average revenue per user, profits, subscriber base and revenues for Zain Bahrain have declined.

In the first six months, Zain’s net income declined 16.8 per cent to $5.9 million, while revenues went down by 4.4 per cent to $99.3m.

“There is not much growth [in the telecoms sector in Bahrain],” the analyst said. “The population is not growing as much as, say, in Qatar.”

Bahrain contributed 5 per cent of Zain Group’s $2.22bn revenues in the second quarter.

In Iraq, which was Zain’s largest market by number of customers, the company has been expecting to list this year. It had 16.09 million customers in Iraq at the end of second quarter, up from 15.99 million in the previous.

“But Iraq is practically at war right now and until things stabilise I don’t see it listing, at least this year,” said the analyst.

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