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

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Summary
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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.

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IPO Rakes in $1.2 Billion
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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.

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Strong Demand to Cash In
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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.

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Big Fish, Small Pond
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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.

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Comment
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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