Trade unions agree to BSNL IPO

A major hurdle in the proposed initial public offer of government-owned Bharat Sanchar Nigam Ltd...

A major hurdle in the proposed initial public offer (IPO) of government-owned Bharat Sanchar Nigam Ltd (BSNL) was removed today as the unions have agreed to “respond positively” to the proposed listing of the company. This was conveyed to union communications and IT minister A Raja by trade unions of the PSU yesterday.

Though a proper valuation of the company has not been done, BSNL officials feel the company should be valued around Rs 400,000 ($100 billion). They say that its valuation would be much higher compared to Bharti Airtel and Reliance Communications, who have much smaller revenues compared to BSNL.

Bharti Airtel is valued at around Rs 1,40,000 crore, while Reliance Communications is valued at about Rs 1,20,000 crore. Also, while Bharti Airtel had a revenue of Rs 27,000 crore for financial year ending March 31, 2008, Reliance Communications posted revenue of about Rs 19,000 crore for the same year. BSNL had revenue of over Rs 45,000 crore during the same period.

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In January, BSNL stated that it wanted to list the company in stock markets. However, trade unions opposed the proposed IPO saying there was not need for it and threatened to strike from February 26. As a result, the PSU was forced to withdraw its plans of IPO.

BSNL is in the process of massive expansion, especially in GSM mobile telephony, as it has floated tenders for adding over 90 million lines in the next five years over and above the recently ordered over 22.5 million lines.

Total investment in GSM expansion alone is likely to be over $10 billion in the next five years. DoT officials, however, maintain that their expansion plans will not be effected even if there is no IPO. They can easily raise funds for their existing plans from internal accruals. However, if the IPO takes place, then their expansion will be much faster.