Last year telecom privatisations worldwide generated around US$70 billion. This year, the figure will be bolstered by the sale of a stake in Morocco's national operator.
Nowhere are the dilemmas of the stock market embodied better than in telecom stocks. On the one hand, soaring profits and high returns have made them the darling of investors. But on the other, it is precisely such impressive track records which have ensured that telecom shares are fully priced. No wonder then that the prospect of Morocco selling off between 20-30 per cent of its high growth telecoms monopoly provider Ittissalat al-Maghrib (IAM) has sparked considerable foreign interest.
With a government of national unity incorporating the old leftist opposition in place since the end of 1997, the timing of IAM's sale seems odd. But there is no doubt that Morocco's network is in dire need of investment. Morocco is blighted by a pitifully low teledensity (five telephone lines per 100 inhabitants) as well as a high population growth rate (1.8 per cent per year according to the World Bank). IAM estimates there will be 1.7 million main lines by the end of 1999 giving Morocco a teledensity of 6.1 per cent.
The government cannot afford to fund all the necessary investment itself, having already publicly committed itself to eradicating the budget deficit within five years. Moreover, selling off a stake in IAM would boost government coffers, which would again help eradicate the deficit. And with an association agreement with the European Union bringing Morocco into a free trade zone looming, the government knows that the country desperately needs an efficient telecoms sector, and fast.
IAM's listing on the Moroccan bourse will be the largest privatisation transaction to date, and will significantly boost market capitalisation which stood at a modest US$15.7 billion at end 1997. If other Middle Eastern markets are anything to go by, the partly privatised IAM will dominate the local bourse. Already, four regionally based telecoms companies have crept into the Middle East's top 50 companies by market capitalisation, as compiled by the London-based Financial Times, whilst the region's largest company is the UAE telecoms company Etisalat.
As such, IAM's sale is expected to generate considerable outside interest, facilitated by the fact that unlike neighbouring North African market Tunisia, Morocco does not limit foreign ownership. This would be a great boon for a market which so far...