overview
issues
studies
telecoms
resources
other
related
Guides:
Networks
& the GII
Economy
Privatisation:
overview
issues
telecoms
finance
other
studies
Australia
New Zealand
related
Profiles
& Notes:
Telco
mergers
IPOs
M&A
Benchmarks
Telco
Revolutions
Digital
Divides
Aust & NZ
telecoms
|
nationalisation issues and mechanisms
This page considers the nationalisation of telecommunication
networks and other enterprises or infrastructure.
It covers -
Some
nationalisation landmarks are here
and here.
introduction
Nationalisation involves government acquisition of privately
owned business enterprises, infrastructure, land or other
assets.
That acquisition is generally on a compulsory basis, whether
through expropriation or with the former owner being offered
some compensation. Such compensation may be a true reflection
of the asset's value (eg what it would currently fetch if
sold in an open market or what it might fetch if sold by the
owners in future when economic conditions improve) or may
instead be a lesser amount.
Acquisition may directly affect only domestic interests or
instead include foreign shareholders, enterprises (parent
companies and joint venture partners), bondholders and banks.
As such it may embody national aspirations and provide a focus
for international disagreements.
It may see assets pass into the hands of municipal governments,
provincial governments or national governments. It may be
restricted to a specific enterprise within an industry or
instead cover all enterprises within that industry, whether
because there is a natural monopoly, to build a national champion
or to hold one of the 'levers of the economy'.
It may be followed by privatisation
(and indeed by a disruptive cycle of privatisation and renationalisation).
bases
What is the basis for nationalisation? Different factors can
be identified -
- rescue
- an ailing private sector enterprise being transferred
to the public sector to preserve the jobs of employees (and
of suppliers to that enterprise) or to preserve a production
facility that is needed for defence
- expediency
- action that unifies a nation or political group (through
criticism by foreign governments and investors) and diverts
attention from economic mismanagement or corruption at home
- social
equity - public ownership of monopolies to avoid exploitation
by investors (and costs
associated with capital raising by those investors) and
ensure delivery of essential services on the basis of need
(eg building infrastructure on a non-commercial basis to
ensure that poor or remote consumers have access to affordable
electricity)
- self-determination
- 'buying back the farm', 'decolonisation' and 'national
independence' from foreign powers (and often local elites
and compradors)
- cost
- expropriation of an asset (or purchase at a knock-down
price) that was unaffordable by the government if purchased
on a fair market value basis
- rationalisation
- creation of a national champion or enhancement of efficiency
across an industry through compulsory acquisition and amalgamation
of small enterprises, particularly those needing major investment
or with intractable labor relations
- radiant
futures - gaining control of a key industry or
sector as part of transition to a socialist economy without
poverty, strife and hierarchies
- punishment
- the reward for poor political choice by a magnate (eg
Louis Renault's closeness to the Vichy regime) or alignment
of investors with a foreign government
- incapacity
- nationalisation because it is easier than effective regulation
of markets, an industry and industrial relations
- hedonic
- taking an asset because you can, because you will gain
global media attention and because it causing pain to perceived
enemies or authority figures is pleasurable.
mechanisms
As might be inferred from the preceding paragraphs, there
is no single contemporary or historic mechanism for nationalisation.
Practice varies widely, depending on political circumstances,
economic conditions and even personal style.
It includes commercial sale in which there
is no duress: the government offers the owner a fair price
equivalent to that which would be received if the asset was
acquired by another investor or that reflects the enterprise's
fundamental problems. Sale reflects the ability of the government
to fund acquisition (and perhaps fund continuing major losses)
through a budget surplus, through borrowing underpinned by
tax and customs/excise duties, and through royalties from
oil or other resources.
It also includes acquisition in which there is no consent
or where the owner is placed under pressure, for example -
- seizure
by decree - the national leader, with or without
broader legislation, issues an edict taking control of the
asset and reflecting power vested in that executive rather
than a legislature
- transfer
through legislation - a requirement that the asset
passes into the public sector, for example nationalisation
of rail, coal and steel in the UK during the 1940s
-
import/export restrictions - prohibitions
on imports of equipment or on exports of commodities and
products
- capital
restrictions
- constraints on bond repayments and dividends (or dividends
to offshore investors) or restrictions on the sale/transfer
of shares to non-nationals, particularly in emerging economies
that are net importers of capital
- caps
on returns - typically through capping charges
(on a flat or percentage basis) for services such as gas
and water, particularly during periods of severe inflation,
and imposition of super-taxes on an enterprise or industry
basis
-
de-licensing and re-licensing - substantive
or threatened withdrawal of licences to operate in particular
sectors, or imposition of new licensing requirements that
have the effect of regulating the enterprise out of existence
if ownership is not relinquished.
Those
points highlight the importance of 'rule of law' and opportunities
for demagogues in autocracies or emerging economies. In practice
the act of nationalisation has often followed escalating pressure
that encourages investors - particularly foreign investors
- to hand over the asset at less than true value or to seek
lower compensation after seizure has taken place.
Australia
Nationalisation has not been a major feature of Australian
history.
That is because politics have taken a different turn to that
in South America and Africa, because governments have tended
to subsidise ailing producers (or let them expire) and because
governments have tended to establish and maintain their own
enterprises (eg railways, electricity production and distribution,
gas reticulation, shipyards, municipal water supply, telecommunications)
rather than seize them from local/overseas owners. As noted
earlier, many of those
enterprises have been privatised or closed.
The national and state governments have on occasion compulsorily
acquired land, whether for the development of infrastructure
such as roads ('eminent domain') or for distribution to small
farmers and pastoralists (particularly after the two world
wars through the largely abortive 'soldier settlement' schemes).
The Constitution authorises
the national government to acquire property (including enterprises)
subject to compensation on just terms. The states are able
to compulsorily acquire property but are not obligated to
provide just compensation. The major incident is the 1948
'Bank Nationalisation Case' (Bank of New South Wales v
Commonwealth, discussed here)
in which the High Court rejected an attempt to gain control
- without ownership and therefore an obligation to pay compensation
- of the major banks.
We are occasionally asked whether the national government
could and should nationalise Telstra,
the dominant telecommunications provider. In principle the
government could acquire Telstra: it is a corporation that
is registered in Australia, operates in Australia and is subject
to Australian law.
In practice Telstra will not be nationalised, given political
considerations, the cost of compensation and the scope for
achievement of objectives through regulation rather than ownership.
Some of the more irreverent studies for example have suggested
that it would be cheaper for government to roll out a new
fibre-to-the-home (FTTH) network than to buy Telstra from
its shareholders.
next page
(studies)
|
|
