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Tuesday, December 4, 2012

The country's IPO (Initial Public Offering) market is about to heat up soon.

India's largest telecom operator, Bharti Airtel, has announced the IPO for its tower arm Bharti Infratel. Expected to amount to Rs 40 bn, the issue is the largest to hit the markets in two years. But the question to ask is why does Bharti need to come out with an IPO at this time? The reason is simple. The incumbent operator needs funds for expanding and updating its network. The next question would be why did it not need funds before? Why now? The answer to this one is the government .

The government's policies on spectrum fee, spectrum charges, spectrum auction have all been targeted at one thing. To raise more money for the government itself. As a result the operator has had to resort to listing its tower arm for much needed funds. The parent company's funds would be used to pay the one time spectrum fees and fund the spectrum re-farming charges and auction money. But would the listing really help the operator? It is unlikely to help it in any way except for providing momentary relief. At least for a while it need not try and dig up more money for network expansion. The long term prospects of the company are still very much dependant on the government's policies. If the government continues with its humongous expectations of funds from the telecom sector, the need for funds by the operators would just keep growing. However if the government has learnt a lesson from the flop show of its recently held auction, then the telecom operators may see their fortunes reviving. Either ways it's not the listing that will decide the company's fortunes. But the government will.
02:40
 

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