The government’s decision to list the state-owned telecom major BSNL is welcome. It would help make the company more transparent by migrating it to a board-driven capital market mode of governance and pave the way for the merger of MTNL and BSNL. The company has an ambitious expansion plan in the largely voice and SMS 2G services. Now with the 3G policy giving a preferential treatment to the state-owned players, BSNL will surely need large fund infusion.

However, funds are not the primary reason why the company should list — it has more than Rs 35,000 crore stashed away in bank deposits alone. The company needs listing so that it comes under greater public scrutiny through stock market disclosures. This is particularly relevant in the context of the controversy over the company’s tender for GSM equipment. A more broad-based board with 50 per cent independent directors should be able to steer the company though such minefields better. The stock market pressure would also force the management to deliver results; the telecom minister has expressed concern over the slow growth in value-added business at the company. Part of the blame rests with the governments. Despite being one of the most profitable and large PSUs, BSNL is still a mini-navratna with very little autonomy. Listing would make the company lot more independent.

The government could have, however, handled the IPO announcement better. The telecom minister has suggested a price band of Rs 300-400, even before appointing merchant bankers to the issue. This price is apparently well below what the company’s management was expecting, going by the valuation of peer stocks. If the price discovered by the merchant bankers is very different from the minister’s estimate another controversy will erupt.

The company also has a difficult task of getting the unions to support the issue. A generous stock option along with better communication with the employees about the benefits of the issue would help. The employees are aware of the costs BSNL has had to bear because of government ownership and the attendant indecisions. The doubt that this would eventually lead to privatisation also needs to be addressed. BSNL’s listed sibling MTNL has not been privatised