Mobile phone company Zain Iraq announced that it will put 25% of its shares on the Iraqi stock market, less than three weeks after its rival Asiacell placed a portion of its shares on the same market. Observers claim that these offerings represent a qualitative shift of how business will be done on the Baghdad Stock Exchange.
The two companies are in a heated competition to dominate the Iraqi market, with Zain Iraq claiming that at the time of its public offering its subscribers totaled 14 million, while Asiacell claims to have 10 million.
The two companies and a third mobile phone company, Cork, obtained licensing to operate in Iraq after having contracted with the Iraqi government in 2007. Zain Iraq is a branch of the Zain Kuwait Co. and most of its activities are focused on southern and central Iraq.
Gulf companies have the largest stake in Asiacell shares, while Cork is owned by Iraqi businessmen. Cork is also contractually bound to offer 25% of its shares according to the licensing agreement it has with Baghdad, but has yet to announce any procedures towards this end.
Zain Iraq and Asiacell undertook a series of measures to shift from operating as private companies to shareholder companies in preparation for offering their shares on the public market. These measures included selling off technical support sectors to private companies, taking inventory of assets, and determining the periodic disclosure formats for profits and losses.
Zain Iraq said it would be offering 25% of its shares on the Iraqi stock market in June and expects high demand. The company said that its profits increased over the past year by about 6% and that it expects double digit growth during the coming year.
The Iraqi stock market had announced in the beginning of February that 35 billion shares of the 67 billion shares offered by Asiacell had been traded.
This volume of trading is the largest seen in the Middle East since 2008. An Iraqi financial expert said that Asiacell will realize profits of around $1 billion as a result of this trading.
Asiacell announced the successful completion of its stock offering in a public statement, saying that these measures allowed thousands of investors across Iraq to contribute to the equity of the company.
The company said that the Iraqi stock market made further purchases of their stock unavailable to the public, but added that opportunities to purchase more shares will come again after the public offering is completed.
The company said that offering price was fixed at less than $2 per share, which means that the company’s market value stands at approximately $4.9 billion. The company stated that the public offering successfully raised $1.22 billion, representing 25% of the company's capital.
The company also said that this offering, in which all of the shares on offer were purchased, revealed the large amount of investor interest from investors in Iraq, the Middle East, and the world over.
According to the contract with the Iraqi government, Zain Iraq, Asiacell, and Cork were all bound to commence the initial public offering (IPO) process in August 2011, but for undisclosed reasons, none of them were able to meet that deadline.
Economist Jawad al-Shammari says that the mobile phone companies believe that the Iraqi market is on the verge of a significant growth period. Shammari adds that mobile phone company IPOs on the Iraqi stock market would encourage small investors, and even ordinary people, to invest by purchasing shares. He added that, “The stock market needed this boost so it could convince the Iraqi people that it is an appropriate place for them to grow their money.”
Omar al-Shaher is a contributor to Al-Monitor’s Iraq Pulse. His writing has appeared in a wide range of publications including France’s LeMonde, the Iraqi Alesbuyia magazine, Egypt’s Al-Ahaly and the Elaph website. He previously worked for Al-Mada covering political and security affairs and as a correspondent for the Kuwaiti Awan newspaper in Baghdad in 2008-10.