Sky is the limit

Ross Cormack, CEO, Nawras speaks about the forward approach and growth plans of the company following the launch of its IPO. Excerpts from a candid interview with Visvas Paul D Karra
 

Nawras is the first company in Oman to use a book-building process for an IPO. How did you arrive at a fair price with this method?

When we sat with the Capital Market Authority (CMA) for our IPO, they said the banks had recommended an improved process of price setting and they actually had asked BankMuscat to study this process over the last two years and they had concluded that the time was ripe to introduce the book-building process. In addition, we were glad to be part of this process as it is yet another first.

The principle is that the process interrogates all the professional investors who follow telecommunications in this region. They are the experts who have paid to get the answers right. They were asked en masse to tell how many shares they would buy at different prices. This means that you can basically draw a demand curve and since you know how many shares are available and you have the demand curve, the place where they intersect is the fair price for the institutions.

If it is a fair price for the institutions, how can you say that it is a fair price for retail investors?

Well, the fact is that they (institutional investors) are specialists at that business. Clearly some get it right more than others but they are still fully informed as compared to retail investors who can of course never be fully informed because it is not their job. Therefore, they can rely on the fact that the price, which is finally struck, is a price, which should broadly meet the available demand with the available supply, in other words a fair price.

Why did you choose the book-building approach for your IPO?

People are concerned about after-markets therefore book-building helps in this. Firstly, because the equilibrium of the price setting is so much better than other methods. There should be relative stability going forward, all other things remaining equal.

Secondly, because of the process, the institutions will look at their appetite in a demand-curve way, which means that if they see a difference in pricing as they go forward they are ready to come in. So it creates stability. You are talking to the manager of the company now. You may ask why we need a stable life. What we are doing is looking after customers. Now if we lose that focus, it is not a good way of spending our time. The virtuous circle we have at the moment is that if we look after our customers properly, they will use our service; if they use our service, that drives our financials and that looks after the shareholders. So we try to stay focussed. That’s why we like stable markets. Now obviously, our challenge – one that we gladly accept – is to try to grow that value over time. It is an important point to remember that we are still talking about a growth company; this is not just a dividend yield company. So, if you look at Nawras it is something very special. You will be a very satisfied receiver of dividends and you will also be participating in a company that is growing. We think it is very attractive and we are very excited by this opportunity.

How successful will Nawras IPO be in the prevailing weakened economic conditions?

I see success being defined as ‘happy sellers meet happy buyers’. Then this is also a kind of an opportunity for us. At the moment, people may have an opportunity to enjoy our services or they may choose not to; but this IPO can now appeal to an even wider group and we may attract people who are not our customers to invest. Maybe we can get them to try our services as well. We think it is a very good time to come into the market from an operational point of view because we can really meet and exceed the demands of the new shareholders and at the same time attract new customers.

Shareholders will be curious to know the growth areas for Nawras, knowing that you have geographical limitations for any expansion.

We see growth in a number of areas. By the way we don’t feel geographically limited, as we have got over 300,000 sq mtrs of land in Oman (laughs) itself. The growth that we see in continuing the mobile business, with 140 per cent penetration, is enormous if you just compare with the UAE, which has 230 per cent, SIM card penetration. And we are seeing growth every day with hundreds of customers being added everyday.

The other growth areas are largely new, making us very excited. The first is in the business corporate market. In the past, we had only mobile services but now we can go to the corporates and ask if we can bring fibre to your business as we can provide all types of services. And when we look at our corporate customers in the eye, they look absolutely excited because there is an unrequited demand for real latest fixed services and we have some unique aspects to our product offerings in the fixed area. This is why we have been able to attract some famous names like Imtac, BankDhofar and Oman Air. That means we are already showing the benefits of having that fixed portfolio.

Then there is growth in the international market. As we land our international cable, it gives us the opportunity to take benefits of the geography of Oman as a hub in the region. So we can move other people’s traffic through our country on to other countries. That is a very big business indeed by the way and that is a new revenue stream for Nawras, which we didn’t have before. Apart from that, being part of the Qtel group we have the natural advantage of having a large number of sister companies that would love to route and receive traffic through our cable. So it’s a win win situation. We can be a hub in this region for independent operators of the world and also for our parent company. Domestic broadband is another area of growth. That is relatively underserved. Even if it is as high as 10 or 15 per cent in Oman there is still a massive underserved portion. That is a growth oppor-tunity. Because of the international cable and international gateway, we can control our costs much better and because of that we now have the virtuous circle of having more opportunities to control costs and also grow our revenues, which is obviously something, which the shareholders will be very pleased to enjoy as that will translate into more net profits.

Has there been a delay in the listing of the IPO?

No, there has been no delay. In terms of the license we are supposed to launch around now.

Do you think that, with seven telecom operators in the country, your marketshare will come down?

I think that if you look at what we have done well until now, I don’t mean to do anything different now. We will focus on customers. The virtuous circle is we get great people to work in the company who are really enthusiastic about what they are doing. So they look after the customers, and then we will have customers who use more of our services. They will delight the shareholders with increased revenues and profits. That is the approach. Further, as far we are concerned, competition keeps us on our toes. It means we get out of bed every morning delighted because we are having a good focus on our customers.

How will the money that will be raised going to be utilised?

The money is not coming to the company. The money will just come from a new group of shareholders to the selling shareholders. One-for-one map. So it does not touch Nawras. We have got sufficient funds for our operations. Usually people selling on the stock markets are attracting funding for their operations, whereas we have already got that. We are a growth company with an excellent prospect of dividend yield with enough funding to deliver that internally without any shareholder funding.

 

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