Billion-Dollar Optic Rollout for India?

India's government telephone services have just gone public, and plan to finance ambitious but unstated plans with debt, aiming for an eventual debt-equity ratio of 1:1.

Bharat Sanchar Nigam Ltd (BSNL), India's largest state-run company, went public with a $14 billion asset value.

BSNL is the corporate entity of two former goverment departments: the department of telecom operations (DTO) and the department of telecom services (DTS).

The compnay will have more than 400,000 employees.

Thanks to the intervention of the Prime Minister's Office, BSNL has been privatized three months ahead of schedule.

BSNL has an authorized share capital of $2.2 billion of which the Government will contribute $1.1 billion.

DPS Seth, a career employee of the compnay, has been appointed chairman and managing director of the BSNL.

Gowth planned
BSNL is looking at acquiring firms and entering into partnerships with other companies from day one of its birth as corporatised

"BSNL will be free to acquire companies, partner with other companies, and raise funds from strategic investors," department of telecommunications secretary Shyamal Ghosh said.

Ghosh also said a number of financial investors have shown interest for investing in the new company which has over 180,000 kilometer (km) of optic fiber, 1.6 km of micro wave and 400 satellite earth stations.

He said that with loan liability of just $1.11 billion and asset value of $14 billion (book value) the corporation had tremendous scope of mopping funds from market for all its investment plans, which would be funded in the debt-equity ratio of 1:1.

That implies that the company will issue about $1 billion of debt to finance ambitious but unstated plans.

Licenses in place, but labor unrest threatens
Ghosh said BSNL had an all-India license for operating Internet services and the corporation would start services soon.

Seth said, "We will not accept mediocrity anymore. There is no other option but to give an excellent performance."

He said that the first step of the new board would to be formulating a strategy for the future growth of BSNL adding that a new project called the Sanchar Sagar has already been initiated up by the company to tackle the issue of bandwidth in the country.

The telecoms sector is one of the few areas in which the Indian government realizes a profit.

The Mahanagar Telephone Nigam Limited (MTNL), in which the government has 56 percent share, provides fixed line phone services in Delhi and Mumbai. The Videsh Sanchar Nigam Limited (VSNL), which is 53 percent state-owned, is the monopoly provider of overseas voice services and is the country's main ISP.

The privatization of BSNL provoked a volley of protests from labor unions and a crippling telecom strike. Telephone users in India were hit by a disruption of telecom services for more than two weeks, apparently due to a go-slow campagin by workers opposed to corporatisation. The disruption hit financial institutions, stock markets, companies, ministries, and even government agencies responsible for law and order.

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