US embassy cable - 02AMMAN6586

UNCLAS SECTION 01 OF 02 AMMAN 006586 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PASS USAID FOR ANE/MEA KIM FINAN 
USDOC FOR 4520/ITA/MAC/ONE/PAUL THANOS 
USDOC FOR 6000/ADVOCACY CENTER/CJAMES 
USDOC FOR 6400/RSTEELE/ITA/TD/OEC/RSTEELE 
TREASURY FOR MILLS, PIPATANAGUL 
PASS OPIC FOR STEVE COWAN, ABED TARBUSH 
EXIM BANK FOR BOSCO 
 
E.O. 12958: N/A 
TAGS: ECPS, BEXP, EINV, JO 
SUBJECT: JORDAN TELECOM DEBUTS ON AMMAN STOCK EXCHANGE 
 
REF: A) AMMAN 2420 B) AMMAN 0567 
 
1.  (SBU) SUMMARY: Following a well-subscribed initial public 
offering (IPO), Jordan Telecom (JTC) stock had its first day 
of public trading on the Amman Stock Exchange (ASE) November 
3.  The listing made JTC the largest company on the ASE in 
terms of operating capital, and placed the Amman bourse among 
the largest in the Middle East.  The success of the IPO, 
which represented 10.5% of the company, has prompted the 
government to consider selling another chunk of JTC stock, 
and perhaps parts of the newly unbundled electric companies, 
via IPOs as early as next year.  END SUMMARY 
 
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A CLEAR DEMONSTRATION OF INVESTORS' CONFIDENCE 
--------------------------------------------- - 
 
2.  (U) Making good on its pledge to accelerate 
privatization, the Government of Jordan put 15% of JTC, 
amounting to 37.5 million shares, on the market October 9 via 
an IPO, the first such offering of state assets to the 
Jordanian public.  Individuals or companies were able to 
subscribe for a minimum of 100 shares, with a three percent 
discount applied to the first 1000 shares purchased by 
individual subscribers.  There was no ceiling on the size of 
investment, and the IPO was open to international and 
domestic investors and institutions.  On October 7, the 
government announced that it set the price range at between 
$3.25 and $3.75  per share, depending on demand.  The 
deadline for participation in the IPO, originally set at 
October 23, was extended by one day.  The final price per 
share, announced October 28, was $3.35. 
 
3.  (U) According to figures issued by the Securities 
Depository Center (SDC), 26.2 million shares were bought, 
resulting in gross privatization proceeds of $87 million. 
Jordanian and Arab individual purchases accounted for 
approximately 6.7 million of the shares, with 27,000 going to 
ten foreign subscribers.  The SDC said that 49 Jordanian 
institutions and 6 Arab entities purchased the rest, with the 
Social Security Corporation buying the bulk of it at 5%. 
Although the IPO represented only 10.5% of JT, Finance 
Minister Michel Marto termed the IPO a success and called it 
"a clear demonstration of investors' confidence in our 
economic reforms and privatization program".   As part of the 
offer, JTC announced that shares would be listed on the ASE 
beginning November 4, with an opening price of $3.50. 
 
4.  (U) Following the sale, the government's stake in JTC is 
41.5%, France Telecom's remains 40%, the Social Security 
Corporation's rises to 12%, with the remaining one percent 
owned by the Jordan Telecom Employees' Provident Fund. 
 
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A STAR IS BORN? 
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5.  (U) Closing at $3.43, slightly below its opening price, 
JTC shares made their debut as scheduled.  The listing of JTC 
on the ASE made it the second-highest ranked company (out of 
157) on the bourse in terms of market capitalization at 
$821.8 million, and increased the market capitalization of 
the Exchange by more than 10%, making the ASE one of the 
largest bourses in the region.  A total of 56,000 shares 
changed hands the first day.  As of close of business 
November 6, another 49,000 shares had been traded, with the 
stock rising to $3.50 at the closing bell. 
 
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IMPORTANT TO KEEP UP THE MOMENTUM 
--------------------------------- 
 
6.  (SBU) In a briefing given to econoffs on the progress of 
privatization (SEPTEL), Adel Al-Kodah, Chairman of the 
Executive Privatization Commission, said that it was 
"important to keep up the momentum" generated by the IPO.  He 
said that the Commission was planning to offer shares in the 
electricity generation and distribution companies via an IPO 
some time next year.  He added that the government would 
offer the next tranche of another 10 to 15% of its stock in 
JTC through an IPO next year. 
 
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COMMENT 
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7.  (SBU) With the pressure of the impact of new entrants 
into the telecom market on the IPO and share prices behind 
it, JTC may now be able to view the Real Time fiber-optic 
cable project a bit more favorably (REF B).  Be that as it 
may, with global interest in telecom stocks limited due to 
the downturn in the sector in general and regional unrest 
making foreign investors chary, the government can consider 
the JTC IPO a success.  Providing investment opportunities 
for day-to-day investors in a sound company such as JTC marks 
specific progress in economic reform and capital market 
expansion.  It also emphasizes the Jordanian Government's 
commitment to move ahead on privatization, despite an 
investment atmosphere that is far from ideal.  End comment. 
 
 
GNEHM