Netia prepares for IPO
Netia Holdings, the country's largest private fixed-line phone operator, has plans to issue 2.25 million shares or a 7% stake through an initial public offering (IPO) later this month.
This would be great news for investors interested in telecoms, since the Warsaw Stock Exchange (WSE) doesn't have much else to offer in that sector, analysts said.
"There shouldn't be any problems with Netia's offering," said Andrzej Kasperek, an analyst at Erste Securities Polska. "On (the WSE) there are not a lot of possibilities to invest in the telecom market."
Netia, already listed on the U.S. Nasdaq, holds 23 licenses for local phone operations throughout Poland and is one of three long-distance license winners. Its new share issue will trade on the WSE in July. The company intends to sell 2.25 million shares in the IPO at zl. 110-zl. 150 each. Its subscription period starts May 19. The tranche of 1.9 million shares is targeted at institutional investors, 300,000 at individuals, and 50,000 will be put aside for the company's employees. Apart from the 2.25 million shares offered in the IPO, another 2.25 million will be assigned to Sweden's Telia, its strategic investor, and 425,000 for the company's managerial staff.
Michal Marczak, an analyst at Dom Inwestycyjny BRE Banku, predicts that the offering will be very interesting for potential investors, since the telecom market is one of the fastest developing sectors.
"The company is interesting, despite some risk factors," he said.
According to Marczak, the fact that Netia is greatly supported by Telia will be crucial for investors. The Swedish telecom giant is also expected to purchase shares from current investors, increasing its stake to 48.7% from 30%.
A huge demand also exists for fixed-line telephony, Marczak said. And Netia ranks second to Telekomunikacja Polska (TPSA) of the nation's largest phone operators.
"In comparison to other fixed-line phone operators it has licenses in the main regions in terms of business development, such as Gdansk, Silesia and the Krakow area," he said. "All these licenses were purchased relatively cheap, and that speaks well for the company's management."
Marczak predicts Netia's IPO will be well received by foreign investors.
"A certain portion of the 1.9 million share tranche for institutional clients will also be assigned for foreign investors," Marczak said. Considering the limited options for foreign investors interested in telecoms, a better alternative simply doesn't exist. "On one hand, they could invest money in Elektrim, but Netia would be a better choice," he said. Elektrim typically spends a lot of money for companies and then has to restructure them. "It demands time and money," Marczak said. "Netia sets companies up, develops them, and that's a better solution." Netia also operates in better regions, he added.
TPSA is another option. "And I'm not saying that buying its shares is not interesting," Marczak said. But TPSA, unlike Netia, faces huge problems, such as massive overemployment.
However, Zbigniew Lapinski, a telecom analyst with Deutsche Bank, has a different opinion. "We're comparing a company with a dominant position on the market (TPSA) with a start-up with good prospects (Netia)," Lapinski said. " It's like comparing an elephant with an ant."
But Lapinski agrees that Netia's offering will be heavily oversubscribed, since the number of shares to be floated on the WSE is not very large at 7% of the total number of 31.4 million outstanding shares. "There is a small free float, and that is very important because of the portfolio investors," Lapinski said.
He said that share price will be influenced by institutional investors, however, at a level similar to the Nasdaq's. "The expected price will be about $25-$30 per share."
But the most crucial risk factors are related to the company's debt. "The company is not able to finance on its own," Marczak said. He also pointed to foreign currency problems as Netia has debts of $495 million, o200 million and DM 100 million. A serious weakening of the zloty, similar to that seen in recent weeks, would affect the company's finances, given that its revenue is in zloty, while loan servicing is in foreign currency.
Kasperek agrees with Marczak's opinion. "The company has a certain debt in foreign currencies," he said. "And it's influencing its financial results."
