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28| pfi | Middle East Report 2009 Vodafone Qatar Vodafone

t the end of April 2009, with the global equity markets still in the depths of despair and the IPO window largely closed for all but the bravest of issuers, Vodafone Qatar QSC defied the sceptics and closed its

QR3.4bn (US$940m) IPO. Despite being targeted at just Qatari individuals and Qatari-owned institutions, the offer was fully covered, with additional unsatisfied insti- tutions unable to receive shares due to an offer structure designed to skew allocations towards Qatari retail investors. At the close of the subscription period, the IPO was the largest globally in the year to-date, the second largest IPO ever in Qatar and the first multi-national company to be offered on the Doha Securities Market (DSM). HSBC Bank Middle East acted as joint financial adviser and joint lead manager with Qatar National Bank, and Denton Wilde Sapte acted as the company's legal counsel. The IPO was always inevitable and the requirement for

Vodafone Qatar (the company) to offer 40% of its share cap- ital to the public and restrict the offering to Qatari resi- dents was written into the terms of the second Public Mobile Telecommunications Network and Services Licence agreement (the license). This licence was award- ed on December 10 2007 by a consortium consisting prin- cipally of Vodafone Group PLC, the leading global provider of telecommunication services, and Qatar Foundation, "a private institution of public utility" founded by His High- ness the Emir Sheikh Hamad Bin Khalifa Al-Thani. The company was incorporated on April 22 2008 and began rolling out its operations in March 2009. The second mobile licence finally allowed a new mobile operator into the State of Qatar following 22 years of monopoly by Qatar Telecom. The investment case offered to investors was driven by a number of factors.

By Michael Bevan, direc- tor and head of equity capi- tal markets, MENA, HSBC Bank Middle East ; Neil Nicholson, partner and head of cor- porate finance, Denton

Wilde Sapte, Dubai; and Romi Nayef, associate, Denton

Wilde Sapte, Doha.

defies sceptics A

0Vodafone Qatar was entering a buoyant market with average revenue per user or ARPU rates among the highest in the world and a strong outlook driven by a growing and wealthy population in a country with a positive macro outlook and a wealth of natural resources. 0Vodafone Qatar had the support of two key share- holders. Qatar Foundation, a partner with local connections and market knowledge, and Vodafone Group with its international experience and ability to leverage on its global product offering, brand, services and know-how. 0The management team that had been put in place had a wealth of knowledge in the telecoms space and were supported by a very well connected board of directors. The key over-riding issue with regards to the IPO was

always going to be the state of the equity markets and the challenge in establishing the level of potential demand for what was a large offering in a difficult environment. The MENA equity markets in the first quarter of 2009 remained aligned to the global markets – highly volatile and weak. The DSM fell by more than 25% in the first three months of 2009 and, for a short period in February, was down more than 65% from its peak just eight months previously. Given the structure of local deals that are principally targeted at retail investors, there is a limited ability to sound out the market on potential demand and a judgement on the depth of potential demand is based on an understanding of local flows, low level discussions with the large Qatari-based families as well as crucial experience on investor behaviour gained from previous deals. In addition to the unfavourable market conditions, a significant challenge in structuring the offering was to ensure there was a balance between making the IPO a suc- cess and that the offering was covered, while at the same time limiting the impact on the DSM, which typi- cally experiences significant liquidity outflows ahead of

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