Plan to divest 10% in BSNL may be revived

The department of telecommunications plans to revive the issue of disinvesting government shares in Bharat Sanchar Nigam Ltd once a new minister takes charge.

The BSNL board had last year approved a plan under which the government would divest 10 per cent of its shares to the public. But opposition from the unions backed by the Left parties -- which supported the United Progressive Alliance in the last Parliament -- had stalled the process. That opposition has abated, now that the Left is no longer a factor in the current ruling alliance.

"We expect the new government to take up the issue in the next one or two months," said a senior DoT official.

The government had estimated that a 10 per cent stake sale to the public would help it garner over Rs 10,000 crore, based on a Rs 1,00,000 crore (Rs 1,000 billion) valuation for the company. The original valuation, however, was made when the Bombay Stock Exchange's Sensitive Index was near 20,000 level.

Given that the Sensex is at now 14,000 levels, the government can expect to earn far less from a 10 per cent stake. (The ministry is also hoping to garner around Rs 30,000 crore (Rs 300 billion) from the auction of five licences for 3G, or third-generation, telecom services.)

In debates in Parliament, IT and Telecommunications Minister A Raja had made it clear that divestment was a high priority to allow BSNL navratna status, meaning it would acquire a greater degree of autonomy and establish the brand.

The proposal was strongly opposed by the Joint Forum of BSNL Unions and Associations, which threatened to go on strike. The unions also rejected overtures from the management in the form of an employee stock option (Esop) scheme, offering BSNL's 350,000 employees 500 shares each at Rs 10 a share.

Later, Centre for Indian Trade Unions president and CPI-M politburo member M K Pandhe wrote to K Karunanidhi, Tamil Nadu chief minister and head of the UPA ally Dravida Munnettra Kazhagam, not to allow the divestment to go through. Telecom minister Raja was from the DMK.

The Left had also complained that the finance ministry, especially under P Chidambaram, was pushing the divestment to balance the fiscal deficit.

BSNL has around 60 million subscribers, and clocked revenues of over Rs 38,000 crore (Rs 380 billion) in 2007-08. It has, however, been facing tough competition and losing market share to private sector rivals, especially in the mobile space, which accounts for 75 per cent of telecom subscriptions in India.

BSNL was recently overtaken as India's largest telecom player by privately-owned Bharti, which recently crossed the 100-million subscriber mark.

BSNL, meanwhile, is close to finalising a contract for over 93 million GSM lines across the country, which will include both 2G and 3G networks in what is the largest order of its kind in the world.