Investing in the Palestinian territories has traditionally been laced with political and economic risk. But the successful listing of the second player in the Palestinian mobile telecommunications sector has invited a closer look at the potential for investment.

2011 saw the successful completion of the largest initial public offering (IPO) in the Palestinian territories in 10 years, with the shares of Ramallah-based Wataniya Mobile admitted to trading on the Palestine Exchange (PEX) in Nablus. The IPO was a sell-out, attracting strong demand from both the Palestinian retail market and international investors. The offering, which represented 15% of Wataniya Mobile’s total share capital, easily raised the target of US$50.3 million, and sparked a flurry of positive publicity.

International investor interest in the Middle East and North Africa in recent years has largely focused on enclaves of stability and growth in an otherwise turbulent region. These include Saudi Arabia and the Gulf states, as well as Israel and Turkey. But with these markets increasingly mature, and much of the wider region off-limits due to political unrest or international sanctions, attention is focusing on those frontier markets within the region which are either relatively stable or where, as in the Palestinian territories, instability is a relatively familiar hazard and is already priced into the equation.

Wataniya Mobile is the second entrant into the Palestinian mobile sector, operating under a license issued by the Ministry of Telecommunications and Information Technology (MTIT) within the Palestinian Authority (PA). Pre-IPO, the company’s shareholders were the Qatar-baed telecommunications operator Qtel, holding 57% (now down to 48% following the IPO), and the Palestine Investment Fund (PIF), a sovereign wealth vehicle established by the PA, holding 43% (now down to 37%).

The IPO was required under the MTIT license, so as to ensure the opportunity for direct stakeholding in the company by Palestinian retail investors. No restriction was placed by the MTIT on foreign investors, and the founding shareholders were keen to extend the offer to sophisticated international investors, including within the Palestinian diaspora (as well as being a full retail offering within the Palestinian territories).

It was therefore inevitable that the IPO would need to be conducted and documented in a way that would meet both local and international expectations. Previous Palestinian IPOs had been conducted on the basis of a short-form Arabic language offering document in line with the relatively light requirements of the local regulator, the Palestine Capital Market Authority (PCMA). Wataniya Mobile represented the breakthrough deal that would set a new benchmark in the development of the Palestinian capital markets. The IPO was conducted in reliance on the exemption contained in Regulation S under the US Securities Act of 1933. An official Arabic language IPO prospectus was produced so as to comply with Palestinian requirements and appeal to retail investors, with an English version being produced as well for the benefit of international investors. A short-form marketing pamphlet was also produced and approved by the PCMA for use domestically as part of the retail offer.

 Editor’s Note: Latham advised Wataniya Mobile as international legal counsel to the transaction.

Photo: © Tryapitsyn