India plans IPO for state-run phone company

The Indian government is planning to hold an initial public offering (IPO) for about 10 percent of the equity of state-owned telecommunications service provider, Bharat Sanchar Nigam Ltd. (BSNL).

But the government is up against powerful trade unions who fear job losses from the move.

Earlier plans by the government to sell a stake in BSNL to the public were blocked by communist parties within the ruling coalition government. The communists, however, broke away from the coalition in July in opposition to government plans to finalize a nuclear deal with the US.

The IPO continues to meet resistance from BSNL's employees unions.

The country's minister for communications, A. Raja on Thursday offered equity options to employees ahead of the IPO, which could benefit each employee by up to Indian rupees 200,000 (US$5000 approximately) when the company lists its stock on the exchange. But the trade unions have rejected the offer as a "bait".

Negotiations will continue, Raja told reporters in Delhi on Thursday. Raja believes that the IPO will unlock the value in BSNL. Listing will also ensure greater transparency and better resource management in the company, he said.

The government also approved on Thursday the preferential release of 3G and BWA (broadband wireless access) spectrum to BSNL and another government controlled telecommunications company, Mahanagar Telephone Nigam Ltd. (MTNL).

Private sector operators will have to bid for 3G and BWA spectrum in an auction. BSNL and MTNL will however have to pay license fee for spectrum equal to the highest bid at the auction.

BSNL had close to 31 million fixed line subscribers and about 42 million mobile subscribers at the end of June, according to data from the Telecom Regulatory Authority of India (TRAI).

The IDG News Service is a Network World affiliate.