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on the block
telecom egypt offering nears
the selection of a marketing consortium for telecom
egypt and the launching of two new mutual funds on the horizon promise
to spur activity at the stock market.
the anticipated sale of shares in telecom egypt, the state fixed-line
monopoly, moved one step closer toward completion in september,
when the former state authority announced that it had awarded commercial
inter-national bank (egypt) and abn amro rothschild the contract
to value and market the telecommunication company’s initial
public offering.
the offering is likely to be among the most significant ever in
egypt. the market has estimated telecom egypt’s value at £e
25 billion. the government initially planned to offer 20 percent
of the company, but cut the size of the transaction to 10 percent
in early september, reflecting fears that the market would be unable
to absorb the entire issue, especially given the pending sale of
shares in the state’s regional electricity companies.
the offering will be the second in the telecoms sector and one of
the largest on the exchange. as such, it will likely draw sorely
missed foreign investors back to egypt.
the dutch-egyptian consortium outbid credit suisse boston with efg-hermes,
merrill lynch with the na-tional bank of egypt, and morgan stanley
with hc securities. the financial proposal presented by the consortium
postpones payment until the end of the deal, foregoing payment in
the areas of due diligence and information memos on the sale.
the independent financial daily al alam al youm in-itially valued
the deal between the consortium and tele-com egypt at £e 22.33
million, a commission based on the estimated offering value of £e
2 billion, which in-cludes both the local offering and the global
depository receipt. the commission fee, a sticking point in that
past, is based on a percentage of the total value of the transaction
and is done on specified pricing tiers as the value of the offering
increases. if the total value remains at £e 2 billion, then
the consortium will be awarded 0.6 percent in egyptian pounds from
the local offering and 1.3 percent in u.s. dollars for the global
offering, according to al alam al youm.
the percentage awarded to the consortium decreases as the value
of the transaction moves higher. if the value of the deal increases
to £e 4 billion, then the consortium will receive 0.5 percent
of the local offering and 1.25 percent from the global offering.
and with an additional increase in value to £e 6 billion,
the commission rates drop to 0.45 percent and 1.15 percent.
meanwhile, fleming ciic will manage two new egyptian mutual funds.
the first is al watany bank fund, which has an initial paid-in capital
of £e 100 million, an amount that can be increased to £e
150 million after foreign investors show interest.
the second is the capital guarantee fund, with a capital of £e
30 million. nbe, ciic and the egyptian re-insurance co. plan to
subscribe to the fund, which upon completion will be valued at £e
300 million.
glen carey
a research analyst
intercapital securities
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