This page highlights the privatisation and deregulation of telecommunication network operators.

It covers -

• introduction
• rationales and controversies
• Europe
• Asia
• Oceania
• Africa
• Latin America
• landmarks

The note supports the discussion of the 1990s telco sector bubble and the more detailed guide on Networks & the Global Information Infrastructure. It complements a separate note on telco sector mergers, acquisitions and sales.

     introduction

Between 1984 and 1999 around US$244 billion of state-owned telecommunication systems were privatised, with a transfer of assets and service functions from the public to the private sector in what has been characterised as "the sale of the century" and as the major regulatory development since the belle epoque.

That sale often saw ownership move outside a nation's borders. It occurred across the globe - 90 of the then 189 members of the ITU wholly or partly privatised their networks. It was often accompanied by measures to increase competition in service provision, although the new owners of what in most cases were monopolies generally continue to dominate national markets (and may indeed now dominate regional markets). In Australia and elsewhere it has been controversial, with disagreement about processes, outcomes and forgone opportunities.

The literature on privatisation per se - and more particularly on telecoms privatisation as the embodiment of economic orthodoxy - is large, often hermetic and sometimes polemical. Points of entry are Privatization & Competition in Telecommunications (Westport: Praeger 1997) edited by Daniel Ryan, Privatization, Restructuring, and Regulation of Network Utilities (Cambridge: MIT Press 2001) by David Newbery, Competition in Telecommunications (Cambridge: MIT Press 2000) by Jean-Jacques Laffont & Jean Tirole, the 2000 paper The Gains from Privatisation in Transition Economies: Is a 'Change of Ownership' Enough? by Jeffrey Sachs, Clifford Zinnes & Yair Eilat and Welfare consequences of selling public enterprises: An empirical analysis (Washington: World Bank 1994) by Ingo Vogelsang, L Jones & P Tandon.

     rationales and controversies

Network privatisation has been both a market and political phenomenon. The two are inextricably entwined but it is difficulty to escape the sense that selling networks has often been driven by an ideology rather than primarily by macroeconomic arguments or an imperative to "sell the family silver" to fund new initiatives or appease foreign investors.

At an international level it has also been driven by an intellectual hegemony and by what critics have grizzled is the neo-liberal or new world economic order, with emerging economies being benchmarked on whether they were quicker than their peers in selling, deregulating and thereby "fully entering the global economy".

It has reflected perceptions that telecommunications are central to local and national economic competitiveness (and more broadly to a strengthening of civil society). It has also reflected recognition, albeit a recognition sometimes unstated by governments, that phone systems are usually more attractive assets than other government enterprises and often the only readily saleable enterprise after a nation has disposed of printing works, factories, and even bakeries or retailers accumulated over the past century.

Specific rationales have varied from nation to nation, reflecting both the shape of the networks and political circumstances. Arguments have encompassed -

• reduction or even elimination of local or overseas debts, with sale to an offshore investor or investors sending a strong signal about the nation's suitability for foreign direct investment (FDI) or for a soft loan from a major power
• access by the telco to capital and - just as importantly - expertise as the basis for improved service and satisfaction of unmet demand
• privatisation as a corollary for the establishment of effective competition and thereby broader benefits, given perceptions that governments cannot evenhandedly regulate markets in which they own the dominant enterprise
• "unlocking wealth" for government, with funds from a 'privatisation bonus' available for spending on schools, hospitals, the war on terror or subsidies to the network operator for infrastructure development and support of the economically (or merely geographically) disadvantaged
• most dubiously, enhancement of an 'investment culture' (an echo of Disraeli's property-owning democracy), with ordinary citizens buying and enjoying dividends from a stake - however small - in "the big end of town".

Privatisation in the telecommunications sector has generally been preceded and followed by staff reductions - usually with an associated weakening of trade unions, which often did not have a strong tradition of militancy - and inhouse equipment manufacturing operations. Selling or shuttering manufacturing arms reflected the costliness of independently taking equipment from concept to implementation (particularly where the domestic market is small and where the product is neither cheaper nor more efficient than offerings from the handful of global suppliers such as Siemens and Nortel) and wariness about the autarkic approach that has resulted in devices such as the volkscomputer.

Privatisation reflected the availability of domestic and foreign investment from individuals, investment funds and other telco system operators. The cascade of privatisation and acquisitions in Europe and South America, for example, saw US and European operators buy their privatised peers in Europe and then move into (and out of) Latin America and Oceania.

It also reflected perceptions, heighted during the last years of the telco bubble, that traffic would continue to increase at a very high rate, that dominant telcos would be able to leverage their infrastructure to provide lucrative value-added services and that costs would decline through use of information technology.

In practice many of the expectations have been disappointed and there is ongoing disagreement about measuring the macroeconomic effects of telco privatisations. Does it result in improved service and broader coverage? The answer appears to be largely yes. Has it resulted in ongoing systemic benefits for the economy as a whole? Would other mechanisms have generated similar results? Economists are uncertain.

Competition policymaking in Australia and elsewhere has arguably been distorted by the perceived need to "look after mum and dad investors", even though most privatised network operators are fully owned by their peers (eg Telefónica's holdings across Latin America) or have a share registry dominated by a handful of investment funds. Privatisation embodies a broader cultural and political environment. Sale of state assets in some Latin American, Central Asian and African republics has thus enriched 'crony capitalists' - who have subsequently shipped much of the revenue to more stable domiciles - or the local kleptocracy. Is state ownership a prerequisite for rollout of the "futureproof broadband" infrastructure to all citizens? Some observers merely question simplistic characterisations of digital divides and assumptions that broadband necessarily = growth or note against mechanisms that would "privatise the profits and re-nationalise the losses".

     Europe

[under development]

For BT see John Harper's Monopoly & Competition in British Telecommunications (London: Pinter 1997), Cento Veljanovski's Selling the State - Privatisation in Britain (London: Weidenfield & Nicolson 1988), Massimo Florio's 2001 paper The Welfare Impact of a Privatization: The British Telecom Case-History and John Turk's British Telecommunications plc: Privatisation and the Dynamics of Corporatre and Industrial Culture (PDF).

     Asia

[under development]

A perspective is provided by the 2001 Asian Development Bank Special Evaluation Study on the Privatisation of Public Sector Enterprises: Lessons for Developing Countries (PDF).

     Oceania

[under development]

     Africa

[under development]

     Latin America

[under development]

See in particular Luigi Manzetti's Privatization South American Style (Oxford: Oxford Uni Press 1999), Robert Hughes' 2002 Privatization and Modernization of Telecommunications in Latin America paper, Walter Molano's The Logic of Privatization: The Case of Telecommunications in the Southern Cone of Latin America (Westport: Greenwood Press 1997), Ravi Ramamurti's Privatizing Monopolies: Lessons From The Telecommunication & Transport Sectors in Latin America (Baltimore: John Hopkins Uni Press 1996), JP Singh's Leapfrogging Development? The Political Economy of Telecommunications Restructuring (Albany: State Uni Press of NY 1999) and Judith Clifton's The Politics of Telecommunications in Mexico: Privatization And State-Labour Relations, 1982-95 (New York: St Martin's 2000).

     chronology

This chronology is indicative only. Context is provided by the broader timeline elsewhere on this site.

1981 UK govt sells part of stake in international operator Cable & Wireless

1984 deregulation in UK market, with sale of 50% of BT for US$4.5bn

1985 Nippon Telegraph & Telephone (NTT) privatised

1985 UK govt sells remainder of Cable & Wireless stake

1987 Chile sells 53% of Chile Telecommunications Co to Bond

1989 full deregulation of NZ telecommunications market

1989 privatisation of Cook Islands telecommunications

1989 privatisation in Solomon Island through establishment of Solomon Telekom Company

1990 Telecom NZ fully privatised in 1990 through NZ$4.25bn sale to subsidiaries of Bell Atlantic and Ameritech

1990 Telmex privatised through US$1.7bn sale to Grupo Carso, Southwestern Bell and France Télécom

1990 Argentina's Empresa Nacional de Telefonos SA (ENTEL) privatised for around US$5bn

1990 GTE-led consortium buys Venezuelan telco CANTV for US$1.85bn

1991 UK government sells further tranche of BT for £5.3bn

1993 UK govt sells remaining tranche of BT for £5.5bn

1995 partial privatisation of Czech operator

1995 German monopoly DBP Telekom privatised as Deutsche Telekom

1996 Belgian government sells 49% of Belgacom

1997 privatisation of Armenian operator

1997 Danish government sells further 30% of Tele Danmark

1997 sale of 25% of Russian operator

1997 Australian telecommunications sector opened for full competition

1997 France Telecom part privatised

1997 Telstra partly privatised

1998 Telecom Fij privatised

1998 deregulation in Brasil

1998 sale of shares in Telebras brings in US$11.6bn

1998 World Trade Organization Basic Telecommunications Agreement (BTA) comes into force

1999 Qatar Telecom privatised

1999 Aust govt sells further 16.6% of Telstra

2000 Telkom Kenya privatised

2002 India sells most of international carrier VSNL (46% acquired by Tata for US$530m), then deregulates




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