Unitech’s stock was available at at throw away price. People were choosing between Colgate paste and unitech stock. It has also complained to SEBI about a possible stock price manipulation. It’s subsidiary, Unitech Wireless has recently won a GSM license to operate in 22 circles. Unitech which took at a beating at the stock market has something to cheer about. It sold 60% of stake to Norway based Telenor for 6120 crores. This would value the firm at 10, 200 crores. The price they paid for acquiring the license is 1650 crores. They might have spent 2000 crores for the whole deal. 1200 crores of it is raised from banks. That is a great investment for a company which neither had a subscriber nor the infrastructure. Even Warren Buffet will be feeling shy.
I have previously blogged about how the telecom space is becoming over-crowded because of the recent licenses. Granting a license for 1650 crore without an auction is what the government is doing right now. Now, let me ask you this. Why should I pay my hard earned money in terms of taxes at various levels, when the government can earn that money by careful auctioning? Government has clearly lost at least 8000 crores in the Unitech deal alone. The license and the spectrum might not cost that much. May be the truth is somewhere between 1650 and 10,000 crores. Isn’t it a better thing to get that money from Unitech and Telenor rather than me? Government for crying out loud is milking the wrong cow. I understand the farm loan waivers. I understand the NREG scheme. I don’t understand this.
I am happy for Unitech. With the kind of beating it took in the stock markets, it needs a little break. But, not at my expense. The deal is good for India Inc as it brings in a lot of cash in foreign reserves and it increased the valuation of telecom companies. There seems to be no end to the growth of Indian telecom. If estimations are anything to go by, India will have 700 million subscribers by 2012. That is more than 110% growth from current levels. We are at 300 million right now. With such an exponential growth the price for the company which does not have neither a subscriber nor the infrastructure is justified.
Telenor is at rank 21 in the recent list released for the top 25 telecom companies. It is 54% owned by the Norway government. Telenor has mobile operations in 12 countries with 160 million subscribers.
This deal would only prompt other companies which acquired licenses recently like Videocon, Loop and Stel to hunt for foreign investments at obscene valuations.
Do you think government’s decision to not auction the licenses and grant them at throw away prices is justified?
That is Sanjay Chandra…..he is very intelligent………this is the reason why biggies worried about….. his growth. and kept him in jail…………he will be back with a bang…..
“Warren Buffet will be feeling shy” Yes I am agree with you. Unitech Wireless paid Rs. 1621 crores to the government for the licence and spectrum and the company has been valued at Rs. 11,620. This means that the licence/spectrum has been valued at an astronomical value of Rs. 11,620 crores. In ten months, Unitech had made a profit of Rs. 9,999 crores.