Oman plans to sell a 19 percent stake in its biggest mobile telecom operator, raising around $595 million to help the Gulf state boost non-oil income and fund rising public spending.
Analysts said Tuesday’s news, which comes almost five years after the government scrapped a previous plan to cut its holding in Oman Telecommunications Co (Omantel), was part of a drive to privatise more state-controlled companies.
Oman needs to contain state spending and increase non-oil revenue in the medium term to keep its fiscal balance sustainable, the International Monetary Fund said in June, predicting a budget deficit of 0.9 percent in 2015 that could widen to 6.8 percent in 2018.
The non-OPEC oil exporter announced a budget of OR12.9bn ($33.5 billion) for 2013, up nearly 20 percent compared with last year’s plan as it raised spending partly to help keep social peace after street protests demanding jobs and action against corruption in 2011.
Omantel announced the secondary share sale through a statement on the Muscat bourse. The firm’s market capitalisation was $3.13 billion as of Sept. 16, according to Reuters data, making a 19 percent stake worth about $595 million.
The government holds a 70 percent stake in the telecom operator so would be left with a 51 percent majority holding.
The decision to sell down its Omantel stake was “in line with the government strategy to privatise government-controlled companies”, said Joice Mathew, head of research at brokerage United Securities in Muscat.
The sale will be open only to Omani individual and institutional investors, although non-Omanis can trade Omantel in the secondary market – foreigners hold 5.5 percent of the company’s shares.
Minority shareholders were unimpressed by the planned sale – Omantel’s shares fell 4.3 percent to a two-month closing low on Muscat’s bourse.
“The market has reacted negatively because local investors expect the offer to be priced at a discount,” said Kanaga Sundar, Gulf Baader Capital Markets’ head of research.
“It would be a big issue relative to the size of the Oman market, but Omani institutions are liquid enough to absorb it.”
Free float shares on Muscat’s index are worth $9.66 billion, United Securities estimates.
Opting for a public sale is a change in strategy for the government. In 2007, it said it would offload a 25 percent of Omantel to a strategic investor, prequalifying eight operators from Europe, Asia and the Middle East for the sale. It postponed the sale in December 2008, citing the global financial crisis.
The new plan comes as Omantel fights back against domestic rival Nawras, a unit of Qatar’s Ooredoo.
Omantel’s share of the country’s mobile subscribers was 58 percent at the end of 2012, up from 53 percent in 2009 according to its annual report. The company has a near-monopoly on fixed line services, claiming a 96 percent market share last year.
That dominant position has enabled Omantel to improve its financial performance and it made an annual profit of OR116.2m last year, up 4 percent from 2011.
Omantel offers a dividend yield of 7.2 percent, according to Reuters data. That is the joint highest among Gulf telecom operators along with Nawras and should support Omantel’s share price, traders said.
Unlike other former monopoly Gulf operators, Omantel has done little to expand abroad. Its only active foreign unit is Pakistan’s Worldcall, in which Omantel owns a 57 percent stake.
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