INVESTORS POUR $1.2B INTO TELECOMS IPO

UNCLAS MUSCAT 001139 SIPDIS SENSITIVE DEPT FOR NEA/ARPI (RSMYTH),EB/CIP (DROHATGI) DEPT PASS TO USTR JBUNTIN, JFENNERTY, AAUGEROT, KSCHAGRIN E.O. 12958: N/A TAGS: ECPS KPRV ETRD ECON EINV EFIN MU SUBJECT: INVESTORS POUR $1.2B INTO TELECOMS IPO -------------- Summary -------------- ¶1. (SBU) More than 163,000 citizens contributed more than $1.2 billion to the oversubscribed and long-anticipated initial public offering of the state-owned Oman Telecommunications Company (Omantel). The most popular IPO in Oman's history opened at $3.10 a share; prices are expected to surge when trading in the new stock opens to foreign buyers in three months. End Summary. -------------- IPO Rakes in $1.2 Billion -------------- ¶2. (U) Notwithstanding Omantel's lackluster profits in recent years, the IPO attracted $1.2 billion for a stock offering of $748.8 million. The government divested 225 million shares, of which 157.5 million were offered to individual Omani investors and 67.5 million to specified pension funds. Although the IPO was purposely restricted to Omani citizens, shares will be traded without restriction after 3 months. ¶3. (SBU) A flood of media-hype and loan incentives helped spur investors. Many individual investors utilized 6 percent low-interest bank loans offered specifically for the Omantel IPO. Because no single stockholder is permitted to buy more than 5 percent of the total, the Omantel Privatization Committee expects to issue refunds within 21 days. -------------- Strong Demand to Cash In -------------- ¶4. (U) The government went to great lengths to warn Omanis against illegally buying shares on behalf of foreign (primarily GCC) nationals, or for other Omanis seeking to circumvent the 5-percent limit. The Capital Market Authority and Central Bank instructed local banks to be on guard for suspicious financial transactions indicating such proxy trades. ¶5. (SBU) There is a consensus among investors that Omantel shares will bring relatively safe and quick returns not likely to be seen again any time soon. Initially priced at $3.10 per share, unofficial market demand has already pushed prices up to $5.25 a share. Prices are expected to increase significantly following the 3-month waiting period. -------------- Big Fish, Small Pond -------------- ¶6. (SBU) Although memories of the 1998 crash of the Muscat Securities Market (MSM) remain fresh, perhaps the biggest single factor in the popularity of Omantel's IPO is that there simply are not many other options for a relatively "safe" return. According to the press, there are 1.02 million local currency accounts in Omani banks with an average balance of over $6100; 84 percent of these accounts are non-interest bearing. With about 230 MSM listings, thousands of small investors welcomed a chance to profit from the Omantel IPO. -------------- Comment -------------- ¶7. (SBU) Much as the Omani government intended, this successful IPO will draw considerably more average Omanis (and their capital) into the securities market, and boost investor confidence. Anticipation over Omantel's entry into the MSM has spurred activity across the board, powering the MSM to historic highs. BALTIMORE