BSNL Considers $10B IPO

Indian state-run carrier Bharat Sanchar Nigam Ltd. (BSNL) is considering an IPO that could be worth as much as $10 billion, officials told a press conference Monday.

The telco’s finance director, S.D. Saxena, and India's telecom minister, Andimuthu Raja, reportedly told local media that the government is considering selling up to a 10 percent stake in the company in a year's time. The carrier would be looking to raise an ambitious 400 billion rupees (US$10.18 billion) from India and overseas markets in a process that would kick off in the next two or three months.

For the 2006-2007 financial year BSNL recorded revenues of INR397.15 billion ($10.11 billion) and a net profit of INR78 billion ($1.98 million).

According to the Press Trust of India news agency, Saxena said the company, which is India’s largest telecom operator with around 70 million fixed and mobile subscribers, has a market valuation of $100 billion, and the 10 percent stake would be a good size to test the market.

Stocks in Indian carriers have become a hot commodity as mobile subscriber growth has exploded. Regional operators Idea Cellular Ltd. and Spice Telecom made their stock market debuts in 2007, while the country's two largest operators -- Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Reliance Communications Ltd. (RCom) -- both saw their share prices soar by around 60 percent last year. (See India's IDEA Has Ideal Debut and Spice Makes Tasty Market Debut.)

The proceeds of the IPO would be used for network and service expansion.

On that front, BSNL's managing director, Kuldeep Goyal, has said the carrier has applied for approval to offer CDMA-based mobile services along with its GSM-based network. Under a new round of license awards, the Indian government has given CDMA carriers Reliance and Tata Teleservices Ltd. the go-ahead to build GSM networks, and indicated all mobile carriers are free to cross platforms. (See Indian Gov't Grants Mobile Licenses.)

BSNL has drawn up a $500 million plan to run CDMA technology over its infrastructure that would be ready for rollout as soon it receives approval. The carrier already offers limited CDMA-based wireless local loop (WLL) services under the brand Tarang.

BSNL is also planning its next move to expand its GSM network after Nokia Networks rejected its order for 10 million lines. (See Upheaval in India's Mobile Market.)

After its initial tender for 45.5 million lines fell apart and it managed to secure a deal with Ericsson AB (Nasdaq: ERIC) for equipment that will add 13 million new connections, the carrier is looking to award another contract to fulfill its immediate need for additional network capacity. (See BSNL Awards $1.3B GSM Contract.)

BSNL, which has around 33 million mobile customers, has fallen behind Vodafone India in market share, but aims to reach 100 million by 2010.

— Nicole Willing, Reporter, Light Reading

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