Sunday, August 30, 2009

AT&T Eyes BSNL Stake To Re-enter India

. Sunday, August 30, 2009

By stockOzone team

US telecom giant AT&T is learnt to have approached public sector Bharat Sanchar Nigam (BSNL) for investing in the Indian behemoth to re-enter the world’s fastest-growing telecom market.

It is not yet known if the government is amenable to roping in a strategic investor in BSNL, but sources in the know said a pre-IPO placement might be a possibility. “AT&T has expressed interest in BSNL. But BSNL top brass has conveyed to AT&T that only the government can decide on the matter,” a person familiar with the discussions told ET. Officials from the two sides recently met twice in New Delhi to discuss the matter, according to him.

“The government is unlikely to sell a majority stake in BSNL, which is already undergoing restructuring. If at all there is a sale to a foreign operator, it will not be more than 26%, considering the sensitivity of the sector,” said this person.

The PSU is fully owned by the government, which is planning to take the company public, though no time-frame for this has been given yet. BSNL’s net worth works out to Rs 81,000 crore, based on the balance sheet for FY08.

Its counterpart in Mumbai and Delhi, MTNL, is currently trading on the BSE at Rs 95 per share, which is around half of its net worth per share. As BSNL will get a premium over MTNL, being a national operator, its valuation will work out to anywhere between Rs 65,000 crore and Rs 80,000 crore, assuming a 50-100% premium over MTNL’s current trading price.

Going by this, AT&T may have to shell out upwards of Rs 16,000 crore for buying a one-fourth stake in the company. BSNL is present in 21 circles and has already received 3G spectrum from the government.

In response to an email questionnaire, AT&T spokesperson McCall Butler said: “We do not comment on rumours or speculations.” BSNL chairman and MD Kuldeep Goyal also denied the development. “BSNL is not even listed and any such move will require a lot of regulatory approvals,” he told ET.

AT&T’s interest in BSNL surfaced after the US telco failed to buy into any of the other major operators in India, where teledensity is just 40% in a population of 1.15 billion. Tele-density in most countries in Europe and in the US is well above 100%.

AT&T, which is rapidly expanding its mobility business globally, quit Indian mobile space in 2005, selling its 33% stake in Idea Cellular following merger with Cingular Wireless. It received around $250 million from the stake in Idea, which is now valued at nearly $3.5 billion. The Indian telecom sector has seen massive growth since then.

Telecom penetration has reached a whopping 40% from almost 2% four years ago and it is not surprising that AT&T wants to come back. It is learnt that in the past one year, AT&T has held discussions with Maxis Communications, the parent of Aircel Cellular, Reliance Communications and Idea Cellular.

Disclosure: Author does not own any of the stocks discussed here.





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