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du IPO opens to high demand

The sale of a 20% stake in the UAE's second operator, du, has launched and is expected to raise US$648.8 million for its parent, Emirates Integrated Telecommunications Company

The UAE’s second operator opened applications for its US$648.8 million IPO on March 4. The founding shareholders of Emirates Integrated Telecommunications Company (EITC), ARE selling a 20% stake in du, the new provider that was unveiled to the public last month. Initially only UAE nationals are able to invest, but they will be free to sell to foreigners on the Dubai Finanical Market.

Demand for the shares is thought to be high. Bankers in Abu Dhabi claim that branches of receiving banks have been overwhelmed. With the sale only open to UAE nationals, demand is expected to be boosted by local investors feeling they might get a better allocation. Being relatively scarce in the region, IPOs often generate huge demand. In 2004 and 2005, IPOs in the GCC region were oversubscribed on average by over 70 times.

EITC is selling 800 million shares in du for AED3.03 a share including operating expenses. EITC shareholder included the UAE finance ministry, with a 50% stake, Abu Dhabi investment vehicle Mubadala Development Company and Emirates Communications and Technology Company, each with A 25% stakr.

Last month EITC confirmed it had bought DIC Telecom (TECOM) for AED1.2 billion (US$330 million), giving it several thousand customers in new developments across Dubai. The acquisition valued each existing TECOM subscriber at over US$17,000 and EITC expects to begin offering services, starting with mobile, in the second half of this year.

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