Discarded IPO marks BSNL's sinking fortunes

BSNL  India  IPO

Discarded IPO marks BSNL's sinking fortunes

Ruth David  |   February 16, 2010
News of BSNL’s abandoned IPO should come as no surprise to anyone who’s been tracking the sinking fortunes of a company once seen as a national champion.
Now India’s fifth-largest telco, telecom officials worry that the state-owned operator will not attract much investor interest in a market where investors are still wary of sinking money. Another state enterprise, National Thermal Power Corporation, received a poor response to its follow-on offer this month.
Talks of a BSNL IPO have been doing the rounds since India’s cabinet approved divestment of a 10% stake two years ago. But with the collapse of BSNL’s IPO plans the giant will most likely seek a private placement.
Minister of State for Communications and IT, Sachin Pilot, told reporters at an industry conference last week that a private placement was “under consideration… the final decision will come from the Cabinet.”
But a bad equity market isn’t the only challenge BSNL is facing. “Their networks are comparable to private sector companies,” says Amit Gupta, principal analyst for Emerging Markets at market research firm Ovum. “But the organization needs to change fundamentally, to become customer-centric. They still have a very bureaucratic structure and you need to fill in tons of paperwork to get anything done.”
In an intensely competitive marketplace, BSNL is feeling the pinch of that bureaucratic reputation, both internationally and within India. Earlier this month, it lost a bid to manage the telecom networks of Ethiopian Telecom, a state monopoly. France Telecom, which reportedly made a less competitive offer financially, won the deal. The New Delhi-headquartered BSNL didn’t qualify on some other parameters, said an official in the know, including its performance in the domestic market.


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