Government and Trade unions are again at clash over mulling IPO of public sector telecom giant BSNL. Trade unions see this move as a step towards privastisation of BSNL and thus they are dead against the PSU going public. While the government insists that listing of BSNL is necessary for granting “Navaratna” status, union leaders feel otherwise. They point out “Navaratna” companies such as HAL and LIC, which are still not listed. Another reason for unions’ opposition is the past decisions by government of ultimately selling listed PSUs like VSNL and BALCO.
Unions are also using the VSNL/BALCO sale as argument for undervaluation. They have accused government of undervaluing the PSUs and are using case of BALCO sale to strengthen their argument. The government has valued BSNL at around $100 bn based on the Vodafone and HutchisonEssar deal. However, the unions are in opinion that BSNL is valued ten times more than the government valuation, which would put it at $1,000 bn. According to union’s estimation, the actual divestment of shares for the IPO collection should be 1% of BSNL shares not 10%.
The BSNL valuation funda becomes murky, as the government assessment based is based on some deal and some other company with less similarity to BSNL. Vodafone, unlike BSNL attracts customers that attach premium to the service offered by the service provider while, BSNL’s product offering is considered economical. BSNL also has large number of workforce and its productivity and efficiency yet to be determined. Its growth rate has not been as high as some private players in GSM market.
But, BSNL still is the largest telecom player and has virtual monopoly over wireline and rural telecom business, plus it is a big time player in long distance call and internet business. Its tower unit will attract huge valuation. Also, unions prefer companies to be valued on their assets rather than their net worth and business prospect. The government, which is in desperate need of funds will like go for IPO as early as possible but its one time friend and present nemesis, CPI & CPM, are bound to create ruckus over the issue of valuations.
Unions are also using the VSNL/BALCO sale as argument for undervaluation. They have accused government of undervaluing the PSUs and are using case of BALCO sale to strengthen their argument. The government has valued BSNL at around $100 bn based on the Vodafone and HutchisonEssar deal. However, the unions are in opinion that BSNL is valued ten times more than the government valuation, which would put it at $1,000 bn. According to union’s estimation, the actual divestment of shares for the IPO collection should be 1% of BSNL shares not 10%.
The BSNL valuation funda becomes murky, as the government assessment based is based on some deal and some other company with less similarity to BSNL. Vodafone, unlike BSNL attracts customers that attach premium to the service offered by the service provider while, BSNL’s product offering is considered economical. BSNL also has large number of workforce and its productivity and efficiency yet to be determined. Its growth rate has not been as high as some private players in GSM market.
But, BSNL still is the largest telecom player and has virtual monopoly over wireline and rural telecom business, plus it is a big time player in long distance call and internet business. Its tower unit will attract huge valuation. Also, unions prefer companies to be valued on their assets rather than their net worth and business prospect. The government, which is in desperate need of funds will like go for IPO as early as possible but its one time friend and present nemesis, CPI & CPM, are bound to create ruckus over the issue of valuations.
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