Now, BSNL chief backs IPO for expansion

NEW DELHI/ KOLKATA: The telecom establishment appears completely confused about Bharat Sanchar Nigam Ltd's (BSNL) initial public offer (IPO), billed as India's biggest.

First came a statement last Monday from communications minister A Raja saying that his ministry was contemplating an IPO for the public sector giant where the government will dilute a 10% stake, estimated to be worth $10 billion or Rs 40,000 crore.

Then, on Thursday, Raja took a U-turn, with his office issuing a statement that BSNL has no plans to come with an IPO in the immediate future. "The matter will be discussed internally and then a suitable decision will be taken in this regard. An IPO for BSNL will be issued if considered appropriate," the statement said. The telecom department was facing huge pressure from the Left-backed unions against the proposed IPO.

However, on Sunday, BSNL chairman Kuldeep Goyal made it clear that faced with a stagnating turnover and a possible marginal dip in profitability in the current financial year, the state-owned company may have to take the IPO route to fund expansion. "The IPO may be required for BSNL," Goyal said.

Goyal said, during 2008-09 the company's turnover was likely to hover at the last year's level of Rs 40,000 crore.
He said that stagnation in revenue would be primarily due to falling tariffs and there could also be a dip in profitability due to rising expenses. In the last financial year, BSNL's net profit was Rs 7,800 crore.

Goyal told reporters that the telecom service provider has drawn up huge investments plans for expansion. While BSNL plans to spend Rs 18,000 crore during 2008-09 for various developmental plans, the investment figure for 2010 has been pegged at Rs 60,000 crore.

Goyal said for the moment, BSNL was having cash reserves of Rs 30,000 crore, which would take care of immediate investment requirements. For future resources, the company might have to go for an IPO, he said. "We will have an internal discussion regarding the IPO," he said.

He said as the fixed wireline service of BSNL was witnessing negative growth, the major revenue drivers of the company in the coming days would be mobile, broadband and other value-added services like IPTV and VOIP