Government Gains from Privatizing Major Sectors: Telecommunications

Topics: Public ownership, Finance, Public company Pages: 2 (512 words) Published: January 3, 2014
What do you believe a government expects to gain from privatizing major sectors like telecommunications?

Privatization is conducted in pursuit of political and economic goals. Recent trend globally has been toward market-based economies, in which government ownership is to be minimized. Considered as a significant way of raising capital and building globally competitive institutions and industries. In the case the privatization auction

Raised an enormous amount of capital
Attracted foreign owners with world class experience in that specific industry. Expectation that owners like Telecom Italia would provide capital, technology, and managerial expertise to take the Brazilian telecom industry forward into the 21st century.

Why would two major investors like CVC/Opportunity and Telecom Italia create a partnership to gain control of a firm and then be unable to agree on the firm’s future strategy?

Alone, either of the two parties could not have obtained the capital or links necessary to take control. As is often the case with joint ventures and strategic alliances, the initial motivations for the partnership are not the same as the long-term strategies of the individual players. CVC/Opportunity is primarily interested in building the profitability of BT itself over time, whereas Telecom Italia sees BT as only one element of a much larger and complex strategy for telecommunications industry penetration in Latin America as a whole.

If you were in management at Brasil Telecom, how would the fighting between your owners alter your ability to do your job? What could you do to ‘manage your owners’?

Management either make all major decisions or guide ownership’s interest in those decisions. Management will typically try to ignore it to whatever degree possible, and prevent ownership’s divided input from entering daily management and leadership. Unfortunately, for major strategic and capital decisions such as the rate at which BT is to fulfill...
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