Privatization drive gathers steam with Saudi telecom $4 billion IPO
The long-awaited partial privatization of the Saudi Telecommunications Company (STC) was launched Tuesday, December 17, with the Initial Public Offering of 30 percent of the company’s shares to local investors. The 90-million share flotation is expected to pour 15.3 billion Saudi riyals (four billion dollars) into state coffers.
The proceeds from STC’s privatization are hoped to alleviate the kingdom’s $168 billion public debt, roughly equivalent to the nation’s annual Gross Domestic Product (GDP). The Saudi British Bank is lead manager for the IPO, closing January 6.
Operating in a market that has known an annual growth rate of 30 percent, STC currently boasts a 4.5-million strong mobile subscriber-base and 3.3 million fixed lines in operation. The company’s net income reached SR2.86 billion in the first nine months of 2002.
The Saudi government began the privatization process back in 1998, by passing control of telecom services to the newly formed joint stock company STC. The mobile phone sector was scheduled to open to competition by 2004, while the fixed-line sector was to follow suit by 2008.
Gradually taking over from the Ministry of Post, Telephone and Telegraph (PTT), STC carried out major telecommunication projects kingdom-wide, while treading a path that would eventually enable it to operate in a competitive environment.
The private sector was expected to acquire equity participation in STC by the end of 2000 with the option of foreign involvement. However, the move was halted when the Saudi Supreme Economic Council announced that foreign investors were banned from involvement in the local telecom sector.
The kingdom’s national privatization program, hoped to generate up to $50 billion, slated for sale public firms including industrial conglomerate Saudi Basic Industries Corporation (SABIC), the national road and railway companies, water desalination, aviation, ports, airport services, hotels and medical services. — (menareport.com)
© 2002 Mena Report (www.menareport.com)