US embassy cable - 05MUSCAT1139

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, Economic Affairs 
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