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S.Africa gets $500m in Telkom IPO
JOHANNESBURG, South Africa (Reuters) -- South Africa raised nearly four billion rand ($500 million) on Tuesday in a fanfare listing of phone utility Telkom, laying the basis for more sell-offs in the country's drive to win global financial approval. It priced the initial public offering at 28 rand a share, near the low end of its offer range, earning 3.9 billion rand. This was less than half the 10 billion rand the government had planned a year ago to get from its major privatisation and comes against a backdrop of one of the most precipitous falls ever in the stock market value of an industry. Telkom shares rose more than four percent to 29.20 rand at the start of trade in Johannesburg, where the bourse toasted its debut with champagne at a red-carpet launch party attended by several cabinet ministers and scores of business luminaries. Telkom was the most actively traded stock by deals. It kicks off trading in New York later in the day. "We expected higher amounts than we have now,'' Finance Minister Trevor Manuel said. ``If we had held off because of uncertainties...we may never have listed. I think that the credibility of government would be questioned a lot more.'' The Telkom IPO was two years in the making, having been delayed by changes in telecoms policy and regulation. The government calls the listing of a quarter of the fixed and mobile group its "landmark'' deal, signalling the state's commitment to privatisation -- a factor holding up an upgrade of the country's debt rating. "The fact that this is the only significant IPO in European and African markets clearly demonstrates that our economy has weathered the storm better and bodes well for future transactions,'' Public Enterprises Minister Jeff Radebe said. Manuel said the funds would be used to cover some of the budget deficit of 1.4 percent of gross domestic product. SPURS PUBLIC OWNERSHIPSources closes to the deal said the order book was more than two times covered, with keen demand from U.S. retail investors. "Most people should be very happy with this, as it is a very favourable price, but it is not at the absolute bottom of the range, which shows there was good demand,'' said Steve Minnaar of the country's biggest fund manager Old Mutual Asset Managers. The IPO lent support to the rand, sending it to 7.92 to the dollar from around 8.05 late on Monday. The government issued 139.3 million shares to investors. More than 127.2 million went to institutional and retail investors in the United States, and to other institutional investors in South Africa and abroad. At home, the remaining 12 million went to retail investors, the issue's sponsors said. This values the group at 15.6 billion rand -- sharply down from the 100 billion rand valuation given to Telkom a few years ago, before telecoms stocks globally went into freefall. On Monday, South Africa cut by a quarter the price range for the shares, citing volatile equity markets. It reduced the range to 27 to 30 rand from 33.50 to 40.90 rand. American Depository Shares (ADS) were priced at $13.98 each. There are four ordinary shares to one ADS. The IPO is South Africa's biggest attempt to spread ownership among the black majority in an economy still dominated by whites nine years after apartheid ended. Going into an election in 2004, the ruling African National Congress must ensure the Telkom IPO does not fail and is hoping that the public will not be burnt by big share price falls. It offered some buffer by giving local retail buyers a discount. Officials are keen to avoid the experience of firms such as Deutsche Telekom and France Telecom, whose investors have seen their shares slide 90 percent since 2000. Radebe said the listing ``made a significant contribution to the deracialisation of the securities environment and made an equally significant contribution to black economic empowerment.'' SBC Communications Inc of the United States and Telekom Malaysia Bhd jointly own 30 percent of Telkom. The two paid over 5.5 billion rand for their stake in 1997. The Johannesburg bourse, capitalised at some 1.5 trillion rand, said the stock would be "fast tracked'' to the key index of top 40 shares if Telkom's value equalled at least one percent of the all-share index at the close on Friday. Traders expect it to displace computer group Dimension Data. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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