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| Wednesday, 16 May 2007 | |
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Private equity investors are like neo-cons: nobody likes them, they don’t care. Is knee-jerk opposition to the PEIs justified?
The notion of private equity investment does not leave much room for sitting on the fence. PEIs have acquired a reputation as über-capitalists, the vultures in Gucci loafers, the ultimate moneymen. To make matters worse, they are mostly American or, at a push, Anglo-Saxon. They are the neo-cons of the financial world. Like their deranged and power-crazed political equivalents, they go about their business in a manner that places profit and expediency above all other virtues be they practical or ethical. You don’t go into the world of private equity in order to become popular. This in turn provides the focal point for opposition to the involvement of PEIs in a sector like telecom. Although ideological opponents of privatisation chanted the mantra “why should I pay for something already own?”, they see the fall of these erstwhile bastions of state utility into the hands of vulture capitalists as a double disaster. That’s enough to rally politicians, labour unions and some (though not all) small investors to the cause of opposing the PEIs. Chuck in the fact that the PEIs themselves are likely to be non-national and it’s time to start burning flags in the street. But why? There’s a rose-tinted notion that telco shares are solid and dividend-bearing specimens of the old-style ‘widows and orphans’, but recent experience does not necessarily bear this out. The degree of feather-bedding enjoyed by telcos since the twin seismic shocks of privatisation and liberalisation has created the fatty corporate residues on which the PEIs intend to feed. In an ideal world, governments would grasp the necessity of radical restructuring of their flag carriers. A clock is ticking very quickly and yet most telcos are of the mentality that the corporate pain of the 1990s need not be repeated. It may be that it needs the aggressive input of PEIs with axes to grind and telcos to grind them upon to make them see sense. If not, exactly what is sustainable about today’s integrated telco model. That’s tomorrow’s question. Jim Chalmers |
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