BSNL board clears $10-b IPO plan
2 Aug, 2008, 0003 hrs IST,Joji Thomas Philip, ET Bureau
NEW DELHI: The BSNL board has cleared the company’s proposed
$10-billion listing, a top Department of Telcom (DoT)
official told ET on Friday. This will bring the company in
direct conflict with its employee unions, which have
threatened to go on an indefinite strike if the PSU goes
ahead with the IPO.
When contacted, a top BSNL executive said: “The BSNL board
has recommended the IPO and asked the government to
facilitate the listing of the company.” The executive also
added that the company has already begun the process of
appointing merchant bankers.
On July 24, ET had reported that the government had
initiated steps to put state-owned telecom major BSNL’s
proposed $10-billion listing back on track. The report also
said the finance ministry had asked BSNL to start preparing
for the country’s largest-ever listing.
The unions are against the BSNL management’s contention that
listing is necessary for expansion and grant of navaratna
status. “It is also decided that if the government moves
with the IPO proposal, the entire BSNL workforce of three
lakh will get into direct action, including indefinite
strike. Other PSUs, including HAL, have been granted
navaratna status without listing. As such, the arguments put
forth for IPO in BSNL are a ploy to disinvest BSNL and
gradually privatise it like Videsh Sanchar Nigam (VSNL),”
the employee unions of the PSU said in a statement late
Faced with opposition from its unions and the Left parties,
the government had shelved BSNL’s IPO twice.
The DoT official said the government would try and bridge
“differences between the BSNL management and its employee
unions, to ensure that talks between the two sides continue
and all outstanding issues are addressed”. BSNL sources also
added that the PSU was planning to offer ESOPs and other
packages to employees to win their support for the IPO.
It also plans to deploy a portion of the proceeds for a new
pension package and for training and redeployment of its
If BSNL does manage to raise Rs 40,000 crore by selling a
10% stake, the telco would be valued at Rs 4,00,000 crore
(around $100 billion). This will catapult BSNL into the
league of top telcos in the world in terms of market cap.
Incidentally, the market valuation of Bharti Airtel is just
around $37 billion.
IPO to pave way for merger with MTNL
government has initiated steps to combine state-run firms
BSNL and MTNL. According to government sources, the
proposed merger may happen after BSNL’s initial public
“The proposal was discussed during the
NDA regime and shelved. With BSNL’s IPO looking a clear
possibility now, the proposal is being reviewed,” an
official in the department of telecommunication (DoT)
said. “Once BSNL is listed on the Bombay Stock Exchange,
we can explore various possibilities, which may include
an open offer or a share swap deal,” he said.
DoT had in 2004 appointed a financial
consultant to look into the proposed merger. It was,
however, suggested the merger would be
more meaningful if both the entities are listed. MTNL is
already listed on the BSE. However, the proposal to list
BSNL was shelved because of political opposition.
The UPA government
had earlier taken up the proposal of BSNL’s listing, but
it was not acceptable to the Left parties. With the Left
out of the government now, the Centre is likely to push
for an early IPO.
The government believes there is synergy
between the two firms. A merger will result in a combined
entity with a turnover of around Rs 45,000 crore. In
comparison, Bharti Airtel had a turnover of Rs
27,025 crore in 2007-08, followed by Reliance
Communications (Rs 18,827 crore) and Vodafone (Rs 15,288
crore). MTNL posted an 8.9% increase in net profit to Rs
500 crore in 2007-08 on a turnover of Rs 5,400 crore.
“The combined entity will not only let
BSNL foray into Delhi and Mumbai, but will also strengthen
MTNL’s reach,” the official said.
07.07.2008 TEAM Members met Shri. Subodh
Kumar, Addl. Secretary, DOT during his visit to MTNL Mumbai
today and submitted a memorandum for speedy decision in
respect of Pension by Govt and Merger of BSNL and MTNL.
Shri. Subhodh Kumar assured his support in respect of the
issues placed before him. Click here for the extract of the