Medibank, Oz Post for ASX?

How do you reduce a budget deficit? Privatise some juicy assets.

The betting is on as to how long it will take for the soon to be installed Abbott government to put Medibank Private up for sale.

And investment banks, which long ago prepared for the sale process, are mulling over a list of other possible contenders, including Australia Post, for stockmarket listings.

In opposition, Coalition leader Tony Abbott  reaffirmed his policy to privatise Australia's largest health insurer which, in 2010, was estimated to be worth as much as $4 billion.

Given its size, a sharemarket float rather than a trade sale would seem the most likely avenue for a Medibank Private disposal, the proceeds of which would put a serious dent in the budget deficit.

The prospect of a listing has been given a boost by the strong lift in equity prices during the past 18 months and with a recovery in the global economy and low interest rates (see Adam Carr's The low rates realities), investor appetite could be expected to keen for a new financial services vehicle.

While the balance of power in the Senate appears unstable, the Greens previously have given the nod to the health insurer being moved out of government ownership as long as the proceeds were used to improve the public health system.

The Gillard government, however, was vehemently opposed to the idea.

Medibank has adopted a more commercial approach to its operations since 2009, including a less than successful shift into health services, winning a $1.3 billion contract to supply services to the Australian Defence Forces.

And its former chairman Paul McClintock earlier this year described public ownership of the business as "an aberration" given it competes against private operators.

In 2006, the Howard government shelved plans for a stockmarket float when it was still operating as a "not for profit" business.  In 2009, however, the Rudd government shifted its focus to a commercial approach which, ironically, now would make the incoming Coalition's task much easier.

Privatising Australia Post would be far more problematic from a political perspective.

Since his appointment as chief executive, however, Ahmed Fahour has shifted the organisation's focus towards a more commercial approach, in particular, expanding its freight capacity for goods deliveries for online retailers that has lifted earnings substantially.

It's "Future Ready" strategy has delivered two years of earnings growth, with a 16.6% lift last year to $281 million which included a $2 billion infrastructure investment to accommodate the rise of the digital economy.

Just as Telstra had a universal service obligation to provide telecommunications to the general population, Australia Post must deliver the mail. Regulated mail losses last year widened to $148 million.

That would have to be worn by a completely privatised Australia Post. Either that, or the Federal Government could retain the "snail mail" and sell the growth businesses.

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