Earlier in the year, there was a perception that the export-dependent Asian economies would not revive until the developed economies came out of the crisis. However, the reverse seems to be taking place with emerging Asian economies like China, India, Taiwan and Hong Kong leading the way out of the slowdown. In the first quarter of 2009-10, four Asian economies ?? China, Indonesia, South Korea and Singapore ?? grew at an average annualised rate of more than 10 per cent, while most of the Western economies grew at less than 3.5 per cent. India grew at 6.1 per cent over the same period.

A similar pattern can be observed in the initial public offering (IPO) market as well.While the IPO market in the West remains stagnant, Asia is gearing up for a boom in IPOs, setting the scene for the region to emerge as a global financial hotspot as firms rush to raise money. Amongst Asian countries, China is leading the IPO flurry after new rules recently allowed listings to resume following a 10-month break. Hong Kong and South Korea too are witnessing a lot of IPO activity. According to PricewaterhouseCoopers, about $12 billion could be raised in IPOs in Hong Kong this year alone, while $1 billion is expected to be raised in South Korea in just the month of September.

India’s flagship stock index, the BSE Sensex, has gone up by more than 50 per cent over the year. Two new IPOs, one by state-owned hydro power major NHPC and another by private power utility Adani Power, have seen their shares being snapped up before their listing. This has led to expectations for increased capital market activity.

In India, $10 billion has been raised through IPOs in 2009 so far, with stateowned and shipyard companies dominating the issues. While there has been no telecom IPO this year, Reliance Infratel is expected to lead the way with its planned issue. State-owned Bharat Sanchar Nigam Limited (BSNL) and Telecom Consultants India Limited (TCIL) as well as private players like Bharti Infratel and Indus Towers too have IPOs in the pipeline.

Telecom IPOs in India
Telecom companies have usually fared well on the bourses. Bharti Airtel was the first telecom company in India to launch an IPO in February 2002. The issue, which raised Rs 8.34 billion, was the first to be made through a 100 per cent book-building process, and the listing of shares was completed within a record time of 10 working days. Subsequently, there were three big IPOs in 2006 and 2007, by Reliance Communications (RCOM) (Rs 60 billion), Idea Cellular (Rs 24.43 billion) and Spice Communications (Rs 5.2 billion).

During the financial turmoil, the markets did not see any major telecom IPO.Those that were announced were either deferred or cancelled. However, the IPO market seems to be reviving now. Reliance Infratel has submitted its draft red herring prospectus with the market regulator, Securities and Exchange Board of India (SEBI), and is expected to become the first Indian telecom company to be listed on the bourses after the global financial crisis.This will be the company’s second attempt to launch an IPO. In 2008, before the global slowdown, the company got SEBI’s approval to launch its IPO. However, with the market conditions not being conducive, the issue was deferred. Subsequently, the company got into talks with a clutch of private equity (PE) majors to dilute some of its stake, as it needed to raise funds for expansion. However, the PE placement plans have now been shelved with the improved financial conditions and the finalisation of the IPO.

The company is looking to raise around $1 billion by offloading a minimum of 10 per cent stake. It intends to use the proceeds for its expansion plans, including increasing the number of telecom towers as well as its geographical footprint. At present, the independent tower company has over 50,000 towers.According to analysts, though a tower used to be valued at an average of Rs 10 million, now, with prices at around Rs 7.5Rs 8 million per tower, the tower subsidiary of RCOM is valued at a minimum of Rs 375 billion. The company has a tenancy ratio of 1.6-1.7 tenants per tower.

The other two telecom tower companies, Indus Towers and Bharti Infratel, may go ahead with their planned listing in 2010. Indus Towers is likely to be listed first, followed by Bharti Infratel. Indus Towers, currently the largest operatorowned telecom tower company in the world, has 100,000 towers and plans to add another 20,000 towers by the end of next year. Bharti Infratel has about 30,000 towers.

The market is also hopeful about a mega IPO from BSNL. While the company has currently shelved its plan to dilute any stake, it is still going to list on the bourses by issuing nominal fresh shares. BSNL’s earlier plan was to dilute about 10 per cent stake through an IPO and raise over Rs 10 billion. However, repeated attempts by the government and the company’s management have failed to convince the different employee associations to accept the sale of government stake. BSNL, which has a paid-up capital of about Rs 50 billion, has been valued at about $100 billion.

Another government-owned company, TCIL, is planning an IPO to dilute 20 per cent stake. The company is currently awaiting the Department of Telecommunications’ approval for the issue.

The Asian telecom market
When the global financial crunch set in late last year, Asian companies faced difficulties in raising money for expansion.Banks were hesitant to lend and nervous investors held on to their money.

Some telecom companies like Qatar Telecom delisted their shares from the stock markets, and a few IPOs did not do well. Qatar Telecom, whose shares had been consistently trading at low volumes, decided to delist from the Bahrain Stock Exchange with effect from February 26, 2009. Meanwhile, Thailand’s True Corporation raised just 6.38 billion Thai baht from a rights issue, way below its target of 19.5 billion Thai baht. Only 32.73 per cent of the 10 billion new shares were subscribed to.

However, the situation is easing up now. Asian stock prices are up by about 70 per cent since March 2009, which has revived investor appetite for new stocks.Consequently, telecom companies in Asia are lining up to tap the stock markets for capital. Some of the major planned IPOs by telecom companies are:

  • Bangladeshi mobile operator GrameenPhone has received approval to launch its IPO in October 2009. GrameenPhone, which is 62 per cent owned by Norway’s Telenor, hopes to raise $68 million through the sale of 69.44 million shares on the Dhaka and Chittagong stock exchanges. It has already raised $60 million through a pre-IPO private share placement, which was oversubscribed by three times, to local institutional investors in December 2008.
  • Hutchison Telecommunications International Limited (HTIL), the telecom unit of Hong Kong’s Hutchison Whampoa, is planning to spin off its fixed line and mobile phone businesses in Hong Kong through an IPO later in 2009. The telecom service provider has hired the Goldman Sachs Group to arrange the deal. It is estimated that HTIL could raise as much as HK$2 billion from the sale.
  • Maxis Communications has chosen Goldman Sachs, Credit Suisse and CIMB to advise the firm on a planned $2 billion listing in Kuala Lumpur. The listing is likely to take place by the end of 2009.
  • The Axiata Group (formerly known as TM International) has revived its plans for an IPO and is likely to finalise the details soon. Earlier, in 2008, the company had planned to launch an IPO of its Bangladeshi mobile unit, Aktel. However, the issue was postponed due to the financial meltdown.
  • Taiwan-based mobile operator Asia Pacific Broadband Telecom (APBT) is planning an IPO. The schedule of the issue is expected to be available in October 2009.

    Some Asian telecom companies have already launched successful IPOs in 2009:

  • In April 2009, Vodafone Qatar’s 3.4 billion riyal (about $929 million) IPO was fully subscribed to. The company offered 40 per cent stake to Qatari nationals in the form of 338.1 million shares at 10 riyals each.
  • Saudi Arabian fixed line licensee Etihad Atheeb Telecommunications’ 300 million riyal ($80 million) IPO was oversubscribed by about 2.5 times. The company launched its issue of 30 million shares, equivalent to 30 per cent of its capital, on January 26, 2009 and closed it on February 9, 2009. Etihad Atheeb raised 601.3 million riyals through the IPO and plans to use the majority of the funds to expand its fixed line telephony network.Following the credit crisis, there is a huge pent-up demand for funds amongst private companies. As a result, a number of IPOs, which had been held back as the markets nosedived, are now being relaunched. The Indian telecom sector being a highly profitable one, investors seem to be eagerly awaiting the listing of telecom companies on the bourses.