Saleh was one of about 200 passengers taking a 25-year-old
diesel train to Basra last week; he was enticed by fares as low
as 7,500 dinars ($6.50) for a seat on the 600 kilometre (375
mile) journey. But like many others, he felt the experience -
especially the train’s top speed of 60-70 km/hour – left much to
be desired.

“The train is not comfortable, it is rocking. I do not feel
secure – I feel it will turn over at any moment. Besides, it is
slow,” said the retired civil servant, who was travelling with
10 other family members to attend a relative’s wedding in Basra.

Iraq’s infrastructure is dilapidated after decades of war,
sanctions and economic decline. In a country where piles of
rubble and incomplete buildings are commonplace, almost every
sector needs investment, including electricity and the sewage
system.

But the country is laying plans to rebuild its historic
railways and become a transit hub for goods that would be
shipped from Asia to Iraq’s neighbours and beyond.

Iraq’s railways date back 100 years; the foundation of the
first line was laid by the Germans under the Ottoman Empire in
1912. That line, connecting Baghdad with the town of Dujail, 60
km to the north, was completed in 1914.

The network has been neglected during the past several
decades of political and economic turmoil. The country has only
two working passenger trains at present, and officials in the
state-run railway company admit that the volumes of passengers
and freight which it carries do not generate enough income to
cover employees’ salaries, let alone revamp the network.

That leaves Iraq with little public transport connecting
regions of the fractious country. Most people rely on minibuses
and taxis to make national journeys, which can be expensive and
dangerous on poorly maintained roads.

“Our passengers have a right to complain because when they
go abroad and see modern trains with new and developed
technology, while our lines are the same old thing, they say ‘I
want our trains to be like the rest of the world,’” said Hadi
Ali, manager of the train station in central Baghdad.

PLAN

Plans to revive the rail system are gaining pace along with
the country’s oil boom and general reconstruction. If
successful, this could not only have economic benefits by
facilitating trade and domestic tourism, but by making travel
easier, maybe even contribute to the country’s political unity.

Last year the railway company finished building a 32 km line
between Mussayab, south of Baghdad, and the holy city of Kerbala
to transfer hundreds of thousands of pilgrims during Shi’ite
religious festivals.

It is also building a new railway parallel to the old
Baghdad-Basra line at a cost of about $700 million; the line is
due to be in service by the end of this year. Currently only
around 250 passengers travel on Iraq’s railways on most days,
but when the new Baghdad-Basra line is finished, the number
could jump to between 2,000 and 3,000, officials say.

A line connecting Baghdad with the northern city of Mosul is
still out of service, but transport officials hope to begin
renovating it next year. Last year Iraq signed a deal to import
ten trains from China, each carrying up to 450 passengers and
running as fast as 140-160 km/hour, for $115 million.

Iraq currently has about 2,000 km of railway lines and hopes
eventually to increase this to 10,000 km of dual-track railways,
with electrified trains running at up to 200-250 km/hour that
would connect all major Iraqi cities with neighbouring
countries.

Mohammed Ali Hashem, manager of the projects department in
the railway company, said the goal was to unload goods from Asia
at southern Iraqi ports and transport them through the northern
Iraqi city of Zakho into Europe via Turkey.

“So instead of a long trip to the Suez Canal and the
Mediterranean Sea, through Iraq it will take 24 hours. Iraq will
become a transit point for goods transfer.”

Hashem envisions around 25 million tonnes of goods passing
through Iraq annually once the rail projects are completed at an
estimated cost of more than $60 billion over five years.

OBSTACLES

For now, such visions face formidable obstacles. One is
financing; just $175 million has been allocated by the
government for projects by Iraq’s railway company this year.

Hashem said there were two options for financing projects:
annual allocations from the government, and effectively
borrowing money from companies hired to perform infrastructure
work – the firms would be paid under a staggered schedule. The
staggered payment model would require passage of an
infrastructure law by Iraq’s parliament, however, and this has
been delayed for several years by political wrangling. It is not
clear when it might be passed.

Khudhair Abbas, deputy head of another transport projects
company run by the transport ministry, said Iraqi railways were
not yet attractive to foreign investors because they would not
be profitable until the country’s southern port of Grand Faw was
built, which would take years.

In the long term, Iraq may be able to find the money for its
railways; the International Monetary Fund expects its oil
exports to expand to $152 billion in 2018 from $94 billion last
year, swelling government coffers.

But there are other problems. Talib Kadhim, head of the
operations and transport department in the railway company, said
many traders preferred to move their goods via private motor
transport firms, even though that was more expensive, because
the firms offered door-to-door services and train stations were
far from the city centres.

Security is still a concern. Recent talks with a foreign
company to transfer crude oil by rail to Akashat, near the
Jordanian border, for shipment abroad were scuppered by the
increasingly volatile sititation in the western province of
Anbar, bordering Syria.

“When stability is achieved, transportation in general will
increase in the country,” said Kadhim.

In the Baghdad station hall, ticket booths remain shut with
the exception of the window for the Baghdad-Basra line, where a
small whiteboard shows train times and ticket prices written in
a red marker.

“I have a lot of memories of the trains in the 1960s when I
was a kid,” said Emad Maki, 54, an unemployed man who was
travelling to Basra with his wife and four children to offer
condolences for the death of a relative.

“I wish our trains were like the ones in Europe. It is
difficult to achieve but I am sure things will be better if
there is determination. If we achieve 50 percent of what others
have, that will be good.”

(Editing by Andrew Torchia)

Last month’s scene at the headquarters of the Baghdad bourse
revealed the struggle which Iraq faces to modernise its
financial system: it must overcome primitive, ultra-conservative
savings habits born of decades of war and political instability.

Thanks to a partial improvement of security and an oil boom,
Iraqis’ average incomes are rising sharply, and they are able to
save more. But many of these savings are not being channelled
into the stock market, where they could earn returns, or even
into bank deposits, where they could be lent on to companies for
fresh investment.

Instead, they are going into real estate, where a large
proportion of the money becomes tied up unproductively, or being
hidden in people’s homes in the form of cash – sometimes hard
currencies such as U.S. dollars – or jewellery.

“Other countries have political and security stability but
we do not,” said local economist Majid al-Souri. “So people tend
to put their money under the pillow.”

GROWTH

Iraq’s economy grew about 8 percent last year and is
projected to exceed that performance in the next five years, the
International Monetary Fund says.

Such growth is supporting a big, if uneven, rise of incomes.
Since the U.S.-led invasion that ousted Saddam Hussein in 2003,
Iraqi government salaries have jumped from the equivalent of a
few U.S. dollars a month to a minimum of around $200 – though
some of that increase is due to appreciation of the local
currency against the dollar. Government figures show the per
capita annual income in Iraq is now about $4,000.

Official, comprehensive data are not available, but the IMF
estimates Iraqis will save about a third of their national
income this year – a rate about 10 percentage points higher than
many wealthy countries in Europe, and 20 points higher than the
United States and Britain. Iraq’s gross domestic product was
about $130 billion last year.

But guiding the savings into productive investments within
the country is proving difficult. The political and security
situation is one big obstacle.

Although Iraq is much safer than it was during the sectarian
bloodletting that killed tens of thousands in 2006-2007, Sunni
insurgents tied to al Qaeda still carry out major attacks. Bombs
hit Shi’ite Muslim mosques in Baghdad and the northern Iraqi
city of Kirkuk last week, killing at least 19 people.

The two-year-old civil war in neighbouring Syria is
straining Iraq’s shaky sectarian and ethnic balance, and over a
year after the last U.S. troops pulled out of the country, its
power-sharing government has lurched from crisis to crisis.

In this environment, savings continue to get funnelled out
of the country to Jordan, Dubai and other destinations. Timely,
comprehensive data is not available, but Iraqi central bank
figures from 2011 show a net $6.4 billion left the country that
year in the form of “portfolio investment”.

“A large amount of money is being smuggled outside Iraq to
be invested there,” said Souri.

Such transfers appear to be conducted largely by the richest
businessmen; smaller business owners, with less access to safe
international payments networks, are generally keeping their
money in the country, Souri said.

Some funds are going into bank deposits. At the end of 2012,
total deposits at Iraqi commercial banks had climbed to around
64 trillion dinars ($55.2 billion), around 22 trillion dinars of
which were from the private sector rather than the government,
said Abdul-Aziz Hassoun, executive director of the Iraqi Private
Banks’ League.

But analysts and government officials say that relative to
the large volumes of savings which Iraq’s fast-growing economy
is generating, the amount of money going into bank deposits
remains fairly small.

This is partly because of concern that it could be hard to
withdraw money in the event of another major security crisis,
and partly because Iraq’s banking sector failed to develop in
the final, difficult years of Saddam’s rule. State-owned banks
are large but criticised for indifferent customer service.

Privately owned banks have top-class technology but their
networks are still relatively small. Trust in them was hurt in
March last year when Iraq’s central bank placed Warka Bank under
guardianship to supervise it through an insolvency process.

“The number of people putting their money into banks is
small in comparison to the size of the population. We do not
have a specific figure but this is the general sense,” said
Abdul-Zahra al-Hindawi, spokesman for Iraq’s planning ministry.
“We do not have banking awareness” in the country, he added.

REAL ESTATE

That leaves real estate as a major destination for Iraqi
savings. In the last several years, money has poured into the
sector; a lot has gone into houses or apartments in the
Kurdistan region, where security is better than many other
places in the country, but Baghdad and other provinces have also
attracted funds.

“Real estate and land are the only guarantee for Iraqis,”
said Zainab al-Azzawi, a civil servant who bought a flat in
Kurdistan and land on the outskirts of Baghdad for $20,000 four
years ago. She estimates the market value of her holdings has
now increased by about 50 percent.

“There is nothing without risk in Iraq, but real estate is
the best among investments,” she said.

Much of the land bought for investment remains undeveloped,
however – an inefficient use of economic resources. And Hindawi
noted that the rise in real estate prices could have a negative
side, by making it harder for ordinary Iraqis to buy homes.

He said many Iraqis still preferred to keep a substantial
amount of their cash at home as a safe, accessible option. There
is little thought of putting their money into equities or other
tradeable financial instruments.

“Generally, there is no awareness of the stock market so we
try as much as possible to educate people through
advertisements, meetings or lectures,” said Firas Mechael, a
member of the stock exchange’s board of governors.

It was at such a lecture last month that the Baghdad
university students struggled with the definition and the
functions of a stock exchange.

The exchange mounted a big public relations drive in January
to promote a $1.27 billion offer of shares by Iraqi mobile
telephone firm Asiacell, the country’s largest-ever
flotation and the first big one since Saddam was ousted.

The offer was a success – the listing doubled the bourse’s
capitalisation to $9.2 billion. But foreign investors, including
parent Qatar Telecom, bought about 70 percent of the
offer, and it was not seen as signalling the arrival of an
equity culture in Iraq.

“The trend to buy shares or bonds is still almost non-
existent, except when Asiacell sold shares because people trust
that company,” said Mudher Kasim, a former deputy central bank
governor.

“People are uncertain. There are no decisions about future
investments in an unstable environment. People are afraid.”

One way to channel savings into financial markets would be
to develop a private sector pension industry, to complement the
state pensions which government employees receive.

The reform has been discussed inside and outside the
government, but no official decision has been made, and Iraq’s
political instability makes legislation on the issue difficult.

“What is needed now is to include the private sector in the
pension law,” Souri said. “There are many suggestions.”

Iraq’s cabinet approved the 138-trillion-Iraqi-dinar ($118.5
billion) budget in October, but differences between Shi’ite,
Sunni and Kurdish factions repeatedly thwarted attempts by
lawmakers to pass the draft legislation in parliament.

Kurdish lawmakers boycotted the vote on Thursday, but 168
members of parliament were present, ensuring the budget was
passed, according to a statement released by the parliament. A
quorum is 163.

“We didn’t attend the meeting,” Kurdish MP Rawaz Khoshnaw
said. “None of our demands were included in the budget. This is
a very dangerous and alarming sign of what’s coming in Iraq”.

The standoff over the budget opened a new front in a
long-running feud over land and oil rights between the central
government and Iraq’s Kurdish region, which in recent years has
signed contracts on its own terms with international oil
companies.

Kurdistan says it is owed more than 4 trillion Iraqi dinars,
or $3.5 billion in total to cover the costs accumulated by oil
companies operating there over the past three years, but Baghdad
rejects those contracts as illegal.

The 2013 budget allocates 750 billion Iraqi dinars ($644.33
million) for oil companies operating in the northern Kurdish
enclave, which include majors such as Exxon Mobil,
Russia’s Gazprom Neft and Chevron Corp.

Some lawmakers from the Sunni-backed Iraqiya Bloc also
boycotted the session, saying that passing the budget without
the Kurds on board would lead to bigger problems.

“Today we laid the foundation stone in the project of
dividing Iraq, because to ignore one’s partner and not listen to
his demands will push him to seek other options,” said Jaber
al-Jaberi, an Iraqiya MP among those who boycotted the session.

“I expect the Kurds will go to the federal court to disrupt
the budget”.

The Kurds say the right to dictate their own oil policy is
enshrined in the country’s federal constitution.

Kurdish crude used to be shipped to world markets through a
Baghdad-controlled pipeline running from Kirkuk to the Turkish
port of Ceyhan, but exports via that channel dried up in
December due to the payment row.

The 2013 budget is based on oil price of $90 and average
exports of 2.9 mln barrels per day.

New legislation to govern the world’s fourth largest oil
reserves has been caught up for years in parliament, which has
been all but paralysed since U.S. troops withdrew from Iraq over
one year ago.

Zain Iraq must float a quarter of its shares and list on the
Iraq Stock Exchange (ISX) as part of its $1.25 billion licence,
as were Iraq’s two other national operators.

The company expects to finalise details of the initial
public offering by the end of June, Wael Ghanayem, Zain Iraq’s
chief financial and operating officer told Reuters in an emailed
response to questions.

If the IPO is fully subscribed, Zain’s stake in Iraq’s No.1
operator and one of its key subsidiaries could fall to 51
percent from 76 percent. It was not clear if Zain Iraq plans to
sell more than 25 percent in the IPO.

The share sale may be Iraq’s largest ever, topping No.2
operator Asiacell’s $1.27 billion floatation earlier
in February, with the proceeds likely to be used to improve Zain
Iraq’s network or repatriated back to Kuwait.

Aside from Zain’s stake, the remaining 24 percent of Zain
Iraq is held by “strategic Iraqi investors”, according to a
statement from Zain.

Separately, Ghanayem said a foreign shareholder will be the
seller in the IPO “rather than the existing Iraqi shareholder”

When asked if Zain was indeed the sole seller, Zain was
non-committal.

“Zain is actively working on its offer structure which will
be subject to approval of all relevant stakeholders,” the
company said in a statement. “The IPO will, in theory, reduce
Zain Group’s overall equity in Zain Iraq.”

The subsidiary reported a 6 percent rise in net profit in
2012 to $369 million and accounts for more than a third of group
revenue.

NBK Capital, a unit of National Bank of Kuwait,
BNP Paribas and Citigroup Inc are advising Zain
Iraq on the planned float.

The telco would not comment on what will happen to the IPO
proceeds, but analysts say they could be retained in Iraq.

“Zain typically lets its country units run on a stand-alone
basis,” said Abhinav Purohit, an analyst at IDC in Dubai.

“There’s talk of new spectrum being sold in Iraq to allow
for 3G services and Zain could use some of the IPO income for
network upgrades.”

Zain, Asiacell and third operator Korek, a France Telecom
affiliate, have nationwide licences but each has a
regional stronghold where a core of subscribers is located.

For Zain, this is the central and southern areas of Iraq, so
it may seek to boost its presence in under-served areas such as
Kurdistan, which is Asiacell’s heartland.

Alternatively, Zain could bring the money back to Kuwait to
boost its dividends as it did when it sold some African assets
in 2010.

The would be welcomed by the Kharafi family, one of the
largest shareholders in Zain and a major family conglomerate in
Kuwait which is heavily leveraged.

It previously tried sell a controlling stake in Zain to
Etisalat of the United Arab Emirates for $12 billion.

(Editing by Dinesh Nair and David Cowell)

The shares were at 24.2 dinars at 0707 GMT on the
Iraq Stock Exchange (ISX). A total of 780,000 shares had changed
hands as of that time; the stock is allowed to trade within a 10
percent range up or down, according to bourse rules.

In a public offer that closed on Sunday, investors in
Asiacell – majority-owned by Qatar Telecom (Qtel) -
sold 67.5 billion shares at 22.0 Iraqi dinars each, offloading a
quarter of the company’s share capital.

It was the first big share offer in Iraq since the U.S.-led
invasion of 2003 and largest equity offer in the Middle East
since 2008.

“The stock is unlikely to be very liquid considering that a
large part of the share sale was bought by foreign direct
investors who are likely to keep the shares for a long time,”
said Hassan Aldahan, chairman of Baghdad-based investment
company Bain Alnahrain.

Foreign investors bought about 70 percent of the shares sold
in the offer and Qtel was expected to be a major buyer, Layth
Sulaiman, head of the exchange’s board of governors, said last
week.

The Qatari company agreed in June to pay $1.5 billion to
raise its stake in Asiacell to 60 percent from 30 percent.

Ahead of the public share offer, Qtel’s stake stood at 53.9
percent, with the remaining 6.1 percent awaiting regulatory
approval, so it was expected to use the flotation to acquire the
rest of what it was due. Qtel has so far not commented on the
results of the Asiacell offer.

The offer was seen as a test of investor confidence in Iraq
as the country recovers from years of war, political instability
and financial sanctions.

Asiacell’s listing values the telecommunications operator at
$5.4 billion, and its listing more than doubles the Iraqi
bourse’s market capitalisation.

“This marks the birth of the ISX as a real stock market,”
said Bartle Bull, portfolio manager of Northern Gulf Partners’
Iraq equity fund in New York.

“Iraq has a far more open, dynamic business culture than
many Gulf countries. The Iraqis are smarter and tougher. We
should see some more companies coming.”

Among future listings are likely to be Asiacell’s domestic
rivals Zain Iraq, a subsidiary of Kuwait’s Zain, and
France Telecom affiliate Korek. Like Asiacell, they are
required to offer a quarter of their shares under the terms of
their operating licences, having missed an initial August 2011
deadline to do so.

“The big cell phone companies are the bellwether stocks in
any market, they’re so well correlated to the overall GDP story
- that’s why international investors get into these markets,”
said Bull, who invested about 10-20 percent of his fund’s money
in the Asiacell offering.

He said he expected Zain’s share offer to be launched by
mid-year.

“Zain of Kuwait is one of the great, well-known emerging
market stocks because they are in a bunch of other Middle East
and Africa markets – fund managers trade this stock,” Bull
added.

The share offer was one of the Middle East’s biggest in the
last few years, and was seen as a test of investor confidence
for future deals as Iraq recovers from years of war, political
instability and financial sanctions.

Domestic rivals Zain Iraq, a subsidiary of Kuwait’s Zain
, and France Telecom affiliate Korek are also
required to sell shares under the terms of their licences,
having missed an August 2011 deadline, along with Asiacell.

Taha Abdulsalam, chief executive of the Iraq Stock Exchange
(ISX), told Reuters on Sunday it had received orders for all
67.5 billion Asiacell shares on sale, comprising 25 percent of
the company’s share capital.

Qatar Telecom (Qtel), which owned 53.9 percent of Asiacell
before the sale, was expected to increase its holding, Layth
Sulaiman, head of the exchange’s board of governors, said last
week.

Ali al-Mukhtar, a local broker, on Sunday said most buyers
were foreigners, with Qtel the main acquirer. Qtel was not
immediately available to comment.

Qtel in June agreed to pay $1.5 billion to raise its stake
in Asiacell to 60 percent from 30 percent, with the remaining
6.1 percent pending regulatory approval.

Firas Mechael, a member of the ISX board of governors, said
foreign investors placed orders for more than 47 billion shares,
with Iraqis accounting for the rest. In total, there were 2,900
separate orders. The shares were sold at 22 Iraqi dinars ($0.02)
each.

A breakdown of purchases by foreign investors was not
available.

The share sale is technically not an initial public offering
(IPO), with Asiacell having earlier completed a nominal IPO so
that it could convert to a joint stock company as required under
Iraqi law to be able to list on the local bourse.

As a secondary offering, some shareholders offloaded their
shares – Faruk Group Holding, owner of an estimated 40 percent,
stake was thought to be a main seller – and they will receive
the proceeds, rather than Asiacell.

Trading had been expected to start on the exchange on
Sunday, but it will now begin on Monday, ISX officials said.

Investors on the trading floor of the Baghdad bourse, which
has a daily turnover of about $4.9 million, gave a mixed
reaction.

Some cheered and congratulated each other. Yaseen
al-Dulaimi, a local investor who had bought 10 million shares,
said he expects the share price to rise when trading starts on
Monday, but Ammar Jassim, 32, was more wary.

“I feel afraid to buy, its price is too high – it could go
down in tomorrow’s session,” said Jassim. “Even my colleagues in
the market did not buy.”

Banking and financial companies make up most of the 85
stocks quoted on the ISX. Asiacell’s listing values the telecom
operator at $5.4 billion and will more than double the bourse’s
market capitalisation when it starts trading.

(Reporting by Aseel Kami in Baghdad, Writing and additional
reporting by Matt Smith in Dubai, Editing by Andrew Torchia and
Erica Billingham)

Al Qaeda’s local affiliate Islamic State of Iraq said “peace and patience” were useless for dealing with the Shi’ite-led government they see as oppressors of Iraq’s Sunni minority.

“You have two options, not three: either kneel before the apostates, though that will be impossible, or to take up arms,” Abu Mohammed al-Adnani, the group’s spokesman said in an audio statement posted on a jihadist website.

Thousands of Sunni Muslims have rallied mostly in the western province of Anbar since December over frustrations they have been sidelined since the fall of Saddam Hussein in 2003.

Maliki says he will address legitimate demands, but warned against militants hijacking protests, heightening concern the OPEC nation risks worsening Shi’ite against Sunni confrontation.

Weakened by war with U.S. and Iraqi troops, Islamic State of Iraq last year vowed to retake ground lost to the government.

With Sunni Islamist militants flowing into neighbouring Syria to battle President Bashar al-Assad, security experts say al Qaeda is gaining funds, recruits and morale on both sides of the border, after years of losses.

Assad, whose ruling minority sect is a distant offshoot of Shi’ite Islam, is closely allied to Iran. The mostly Sunni rebel battle against his rule has started to threaten to upset Iraq’s own fragile sectarian and ethnic balance.

GROWING DEMANDS

Sunni leaders say they want changes to an anti-terrorism law and to a law aimed at weeding out former members of Saddam’s outlawed Baath party, which they believe have been used to unfairly target their community.

In a report released on Thursday, Human Rights Watch said Iraq’s authorities used “draconian” measures against opposition leaders, detainees and demonstrators with security forces carrying out arbitrary arrests and abusive interrogations.

Seeking to defuse the crisis, the government has raised salaries for Sunni tribal militia who once fought al Qaeda, reviewed cases of prisoners and halted arrests made based on information from secret informers.

But Sunni ranks are split and hardliners and Sunni Islamists are calling for Maliki to step down. Some are pushing for an autonomous Sunni Muslim region inside Iraq.

Tensions exploded into clashes in Falluja last week when soldiers killed five people. Insurgents tied to al Qaeda have stepped up attacks trying to spark sectarian confrontation.

Al Qaeda claimed responsibility for a suicide bombing also in Falluja city earlier this month that killed a Sunni lawmaker.

Violence has eased since the 2006-2007 sectarian bloodbath, but al Qaeda and Sunni Islamists have carried out at least one big attack each month since the last U.S. troops left last year.

(Reporting by Patrick Markey; Editing by Jason Webb)

Asiacell will be the first of Iraq’s three mobile operators
to carry out a listing, the first major offering since a
U.S.-led invasion in 2003.

In the past year, Qtel has spent $2.16 billion to increase
its holdings in Tunisiana and Kuwait’s Wataniya to 90
percent or more, pointing to a strategy of tightening its hold
over existing units rather than expanding its 17-country
footprint across the Middle East, Africa and Asia.

Muddying this approach has been Asiacell, Iraq’s No.2
telecommunications operator and 53.9 percent owned by Qtel,
which must offer a quarter of its shares for public sale as part
of its licence obligations.

The sale process is opaque and it is unclear whether
Asiacell’s shareholders would be selling their shares on a
proportional basis.

The idea of selling would be at odds with a $1.5 billion
deal struck in June by the former Qatar monopoly to up its stake
in Asiacell to 60 percent from 30 percent.

Market sources said they expected Qtel to use the share sale
to acquire the outstanding shares it still needs to meet its
target.

“According to the information I have, Qtel will not sell its
shares, it is a buyer,” Layth Sulaiman, head of the ISX board of
governors, told Reuters.

Qtel could even raise its stake further, although that may
depend on demand from other investors.

As of 1100 GMT, the Iraq Stock Exchange (ISX) had received
orders for 46.92 billion Asiacell shares, it said in a
statement, or 69.5 percent of the 67.5 billion shares on sale.
These are priced at a minimum of 22 Iraqi dinars ($0.02) each.

If buy orders are less than 75 percent of shares offered,
the sale will be cancelled and the process will start again.

But the bookrunner and bourse officials have said this was
unlikely, with many investors preferring to subscribe in the
final days so that their money is not tied up for long.

Brokers will be able to place orders for the shares until
0630 GMT on Sunday, with trading set to begin later that day.

The share sale is technically not an initial public offering
because Asiacell has already carried out a nominal IPO to
convert to a joint stock company as required under Iraqi law.

Asiacell and domestic rivals Zain Iraq, a subsidiary of
Kuwait’s Zain, and France Telecom affiliate
Korek all missed an August 2011 deadline to float a quarter of
their shares.

Demand from foreign investors for the Asiacell share sale
exceeded that of Iraqis, Sulaiman said.

(Writing by Matt Smith in Dubai, Editing by Andrew Torchia and
David Cowell)

Qtel’s broad strategy has been to take greater control of
its foreign units; since last year it has spent $2.16 billion to
raise its holdings in Tunisiana and Kuwait’s Wataniya
to 90 percent or more.

Muddying this approach has been Asiacell, Iraq’s second
biggest telecommunications operator, which is offering a quarter
of its shares to the public as part of its licensing
obligations.

The offer opened on Jan. 3 and aims to sell 67.5 billion
shares for at least 22 Iraqi dinars ($0.02) each. Asiacell is
due to list on the Iraq Securities Exchange on Sunday.

Some details of the share offer have not been disclosed and
it has been unclear whether all of Asiacell’s current
shareholders are selling their shares, and if so how much.

Layth Sulaiman, head of the ISX board of governors, told
Reuters on Thursday that he understood Qtel would not reduce its
stake in Asiacell through the offer.

“According to the information I have, Qtel will not sell its
shares, it is a buyer,” he said.

Qtel agreed in June on a $1.5 billion deal to raise its
stake in Asiacell to 60 percent from 30 percent, with the
remaining 6.1 percent pending Iraqi regulatory approval. It may
be using the public offer to reach the 60 percent level.

Demand from foreign investors for the Asiacell offer, which
has not yet been fully covered, has exceeded that from Iraqis,
Sulaiman said. Brokers can receive orders for the shares until
0630 GMT on Sunday.

“What is left is a little portion,” Sulaiman added. “Up to
this moment, work is on going to enter orders to buy shares.”

The share sale is technically not an initial public offer,
since Asiacell earlier completed a tiny, nominal IPO so that it
could convert to a joint stock company as required under Iraqi
law, officials said.

Since it is a secondary offer, local Iraqi shareholders will
sell some of their shares, according to an initial listing
report by sole bookrunner Rabee Securities.

Asiacell and domestic rivals Zain Iraq, a subsidiary of
Kuwait’s Zain, and France Telecom affiliate
Korek all missed an August 2011 deadline to float a quarter of
their shares.

The Qtel subsidiary will be the first of the three to list
in Iraq and its listing will roughly double the ISX’s market
capitalisation, which currently stands at about $4.7 billion.

(Reporting by Aseel Kami, Writing by Matt Smith,; Editing by
Andrew Torchia)

The Asiacell sale is the first major share offering in Iraq
since a U.S.-led invasion toppled Saddam Hussein in 2003 and
will test confidence in the country’s economy after years of war
and sanctions.

The country’s No. 2 telecoms company, which will make its
debut on Iraq Securities Exchange on Feb. 3, said chief
executive Diar Ahmed plans to step down as CEO to take on a new
role as chief adviser to Asiacell’s chairman Faruq Mustafa
Rasul. Ahmed will remain CEO until there is a replacement.

“It is Dr Diar’s intention to step down as CEO to pursue his
new role exclusively, once a new CEO has been appointed,” an
Asiacell spokesperson said.

Asiacell, majority owned by Qatar Telecom (Qtel),
is selling a quarter of its shares to fulfil obligations under
its telecoms licence.

“The offering is now comfortably covered with a good mix of
retail and institutional demand from within Iraq as well as
institutional and high net worth demand from abroad,” Shwan
Ibrahim Taha, chairman of sole bookrunner Rabee Securities,
said.

Qtel in June agreed to pay $1.5 billion to double its stake
in Asiacell to 60 percent, so the Qatari company is unlikely to
want to dilute its holding via the share sale. Asiacell has yet
to say whether the share sale will be done a pro rata basis.

Asiacell, market leader Zain Iraq, a subsidiary of Kuwait’s
Zain, and France Telecom affiliate Korek were
obliged to sell a quarter of their shares to the public and list
locally as part of their $1.25 billion licences issued in 2007.

Asiacell will be the first to do so, since all three missed
an August 2011 deadline to float.

Together these listings could nearly double the bourse’s
current market capitalisation of about $4.7 billion.

(Reporting by Aseel Kami in Baghdad, additional reporting and
writing by Matt Smith. Editing by Jane Merriman)