Mumbai: Ben Verwaayen, chief executive officer of French telecommunications equipment supplier Alcatel-Lucent SA, is nearing the end of a three-year turnaround plan for Alcatel-Lucent, which lost almost €10 billion in the three-and-a-half years following its creation through the 2006 takeover by Alcatel SA of Lucent Technologies.
The firm faces challenging times due to economic uncertainty in Europe and the US, which is why Verwaayen is sharpening his focus on emerging economies such as China and India. During his visit to India to co-chair the India Economic Summit in Mumbai, he spoke in an interview on the meet, global telecom trends and his plans for India. Edited excerpts:
Investment destination: Verwaayen says his firm is on the way to making India a global services hub. Photo: Abhijit Bhatlekar/Mint
Why did you shift the venue of the India Economic Summit from Delhi to Mumbai?
We (Verwaayen is a member of the WEF’s foundation board) hosted the event in New Delhi for 26 years. The participation was great but it’s good to periodically test other models to innovate. India is more than a federal state. Other states have contributed to its growth. It’s good to learn from them. The whole world knows Mumbai and Delhi and about the entrepreneurial activities here in this financial capital. We will see how it works out, but I’m also optimistic about the outcome.
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Ben Verwaayen talks about why the summit shifted to Mumbai and Alcatel- Lucent’s plans in India.
This year’s theme of linking leadership with livelihood coincides with an uncertain global scenario, which is forcing companies to cut costs and reduce workforce, even as CEO salaries are increasing. What are you doing as co-chair to make people believe you’re walking the talk?
We have 80,000 people in our organization. Our business is a cut-throat one. So, when times are difficult, you will have to cut costs. Our shareholders are not happy with us. We had to scale down our projections for profits. This has an impact on how our employees feel since their income is linked to how shareholders react, and this should be the way in a free market economy.
But you have to simultaneously motivate people while taking tough decisions. Similarly, the world scenario is not what it was 12 months ago. The differences are sharper than before and that’s a dangerous situation.
In such a case, the WEF is a very powerful platform since it’s not just businesses talking to businesses but a multi-stake organization with governments and non-governmental organizations also talking to each other. We need such dialogues since we are facing a legitimate leadership question.
Leadership is about providing opportunities to help you develop as an individual, a company, a region or even a country. But you first have to be transparent to have a dialogue on leadership. You also need to have control mechanisms—checks and balances. And you need to define your value system.
Growth, nevertheless, continues to be a big issue today in the West, and even in India. This poses two risks. One is the risk of going back to protectionism in many countries, including India. The second is that we must develop an international platform to make decisions to make sensible, great, understandable decisions that impact all of us.
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A couple of years ago you said you intended to make India a global services hub for Alcatel-Lucent by investing $500 million. You already have research and innovation sites in Bangalore and Chennai.
A lot of the value-added stuff to make communications happen involves intellectual work. And much of that work happens in India because you have smart people here with good cultural and good language skills.
India is important as a market but more crucial from a human resources perspective even though it’s not such a good place to do business. On balance, however, I would say we are well on the way to making India a global services hub.
What’s the current status of your joint ventures with Reliance Communications and Bharti Airtel?
They are good solid bases of activities but are more traditional in nature. But we need to look at future technologies with sustainable business models.
If I look at the telecom space, India is remarkable. The average revenue per user is very low and the demands are very high. Yet, telcos here manage to keep up the tempo. But the business model is under tremendous pressure and is not sustainable in the long run. You will not be able to accommodate 16 players in the telecom space. There has to be consolidation.
Second, people will want to do many more things, and not just make calls. Hence, you will see smart broadband as a differentiator in the market. Besides, the focus is changing from voice to video. But there are price, technology and availability issues. The TV in the palm of your hand is different from the phone in your palm.
Consider this: we could not do blog videos around five years ago. But now we can and much more. But all these technologies need a sustainable business model to monetize them for which you need to sink assets into the ground. It’s in the interest of society at large. Someone has to make those investments. How else can we bring it to the rural areas, and the underprivileged sections?
The future belongs to videos. I’m not talking of passive consumption of videos. I think the world is transitioning from a voice world to an experience world where videos will give you a sense of smell and touch too.