The past week was filled with iPhone related news in the Indian press as the launch neared. The actual launch was a joke, the phone was stupidly priced at USD 824 for the 16GB iPhone 3G. 3G the biggest features was missing, why? Because India does not have 3G running on it’s network, and to me that’s the bigger story. For all the talk about the “mobile revolution” it’s pathetic to think India has no 3G due to political reasons. For quite some time The Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (TRAI) have been playing politics and delaying the auction for the licenses which some estimate could be as high as Rs. 40,000 CR (USD 10 billion). That’s some serious coin and much needed since the gov’t just bailed out farmers and gave all gov’t employees a pay raise.
The other telecom news is the recurring rumor of an IPO for the state owned telephone provider BSNL.
“The company is valued at well over $100 billion. We are looking at offloading up to 10% stake, subject to government approval,” BSNL finance director S K Saxena told reporters. When asked about the development, telecom minister A Raja said: “The government is considering it (an IPO). The department of telecom (DoT) will discuss the issue and take a final decision soon”.
Yup, another USD 10 billion to the government if everything goes as planned. Personally, I would not invest in BSNL since it’s a typical state owned entity that is fast losing customers to the wireless companies. And more importantly BSNL does not service Bombay or Delhi - the two biggest metros in India and where product innovation occurs first. But, hey if they pull it off and retire some of the government debt I’m all for it.
Quiz time: What does BSNL stand for? Bharat Sanchar Nigam Limited (translation: lame customer service and pathetic product set).
1 response so far ↓
1 Gautam Kshatriya // Aug 25, 2008 at 3:14 pm
Hi Manish,
While I agree that BSNL is typical of state owned enterprises in that its filled with lazy, inefficient babus, I’m a little bit more optimistic about the its post public issue success, especially if they’re going to price that 10% at a more attractive Rs. 15 - 20k Cr. (giving them a valuation of $38-50bn), rather than the 40,000 Cr. that they were talking of initially. Based on 2007 earnings of $4.1bn, this would give them a cheap PE multiple of 9.5 - 12.5. See my post on this here: http://www.moneyvidya.com/blog/?p=96.
While private players continue to provide stiff competition to BSNL, you musn’t forget that these guys have possibly the best national distribution infrastructure, and indeed probably the best network coverage in rural India - which is probably where the action is going to be, going forward?
Agreed, about 50% of their business comes from fixed line operations, which is dying out. But surely having a set of customers already in place means that it’ll be easier for them to push them to switch to their mobile services?
Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com
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