Heads I win
The cash-strapped government is expected to collect at least nine billion rupees from the sale
of its 10 per cent of its equity in Nepal Telecom (NT). The one-tenths of the total equity expressed in 15 million shares of Rs.100 par value comes to Rs.1.5 billion rupees. However, the auction method of selling shares, priced at a minimum premium of Rs.600 each, is expected to bring in Rs.9 billion for the government. The premium price has been set on the grounds that NT has made a profit for three years in a row. The bidders can, as is generally expected, go even higher. However, NT has recently sold its five per cent shares to its employees at a discount of 10 per cent on par value. This policy drew criticism, because NT gave away shares worth billions of rupees at market value for less than RS.750 million to its employees, even to non-employees, namely, members of its board, turning all of them millionaires or possibly even multi-millionaires at public expense.
The Supreme Court dismissed a writ petition the other day ruling that there was no need to issue a stay order on the process of initial public offering (IPO) of NT shares. The petition had demanded that each NT phone subscriber should be allocated shares to the amount of his or her phone deposit placed with NT. Indeed, on such a matter, irrespective of its importance, the apex court could not probably have ordered NT how to allocate its shares. Nevertheless, it would make good sense on NT’s part to consider this idea seriously. Every landline subscriber, for instance, has their Rs.5,000 sunk in security deposit for trunk calls. Secondly, giving subscribers a certain percentage of equity would spread ownership geographically, as well as over tens of thousands of people, thus contributing to economic democracy. But such ideas have not often stimulated the interest of Nepali policymakers, probably because making the consumers shareholders as a matter of policy leaves no scope for a ‘mutually beneficial’ deal, as between a big prospective buyer and people in authority — something that had been widely alleged during the first phase of privatisation in the 1990s.
It would be in public interest for the government to make clear its plans for the ultimate ownership structure of NT, as well as of other government undertakings that have been offered as candidates for privatisation, along with the timelines envisaged for completing the processes. But on Wednesday, the ministry of information and communication clarified that it has nothing to do with deciding how the shares are to be sold and at what prices, which are the responsibility of the finance ministry. Whoever may decide, the decision will nonetheless be that of the Nepal government. The auction may bring in the highest possible gain for the government from its sale of equity, but it will push the shares beyond the reach of small investors at the same time. While the government tries to make a case for price hikes in the petro-products the loss-making state-owned Nepal Oil Corporation distributes. But it hardly ever thought of sharing benefits with the consumers despite the profitable run of the state-owned Nepal Telecom.