Markets braced for $325bn of telecom floats

Bankers are preparing for a landslide of new equity issues from state controlled telecoms groups worth up to $325bn (£180bn) globally.

Stronger stock markets, driven by renewed enthusiasm from investors, are expected to tempt governments in Europe and Asia to start a fresh round of public offerings for the equity they retain in their national telecoms companies.

A growing appetite among investors for more telecoms exposure after three years of apathy will be seen by many governments as a useful way to raise some much-needed cash to help bolster public finances, stretched by the global slowdown since 2001.

The investment bank UBS has completed a study that shows that in Europe alone there is about $129bn worth of telecom equity held by European governments.

The biggest holders are the French and German governments. The French government owns 53.5 per cent of France Telecom, its national phone company, with an implied market value of $37.2bn. The German government's 42.8 per cent stake in Deutsche Telekom is worth $33.9bn.

Other governments that could cash in include the Finnish and Swedish governments, which have a $16.2bn stake in TeliaSonera, while the Swiss government's 62.7 per cent stake in Swisscom is worth $13.7bn. The Danes are sitting on a 62.7 per cent stake in Telenor worth $7.4bn. Telecoms bankers at UBS believe a number of governments will seize the opportunity to offload all or part of their stakes in the coming 12-18 months.

The Belgian government is expected to lead the way with a public offering of Belgacom, which analysts reckon could be worth between $5bn and $6bn. Other smaller floats from Europe include Telekom Austria, where the government holds a $3bn stake, and Greece where the government has a $2.3bn stake in OTE.

A potentially larger pool of equity issues lies in the Asia-Pacific region. UBS estimates there is about $196bn of equity held by the Chinese, Japanese, Singaporean and Malaysian governments, among others, that could also find its way onto public markets this year. The bank estimates the Chinese government is sitting on a $46.7bn stake in China Mobile, where the state still owns a 75.6 per cent holding. The Singaporean government recently placed $1.25bn of equity in Singapore Telecom to enthusiastic investors, spurring the belief that more will follow.

Bankers, starved of activity during the slowdown, are looking to large public offerings to boost earnings.