It is business as usual; we carry on growing in the Indian market6 min read . Updated: 06 Oct 2009, 11:20 PM IST
It is business as usual; we carry on growing in the Indian market
It is business as usual; we carry on growing in the Indian market
Geneva: In an exclusive interview, Bharti Airtel Ltd chairman and managing director Sunil Mittal talks about the phone company’s decision to end merger talks with South Africa’s MTN Group Ltd, and the road ahead. Bharti and MTN called off talks on 30 September, the second time that merger talks between the two companies ended in failure. Edited excerpts:
Let me begin by asking you, where did it really go wrong?
I think it is all in the public domain now... I mean, the firms had come to put out a partnership together, which was not to be. We needed certain approvals from the South African government, in particular their treasury, and that did not come through.
We would not know what applications were made. But yes, you are right, an application was made and I believe that a letter from treasury was received by them on 11 September, which is when the DLC (dual-listed company) issue came up. Why they required that approval, I don’t know. But the fact is that cross-holding, in stage 1, did not require a DLC because we were not seeking a merger. But may be the government or treasury in their wisdom wanted to see the eventual path of where the companies will end up being, in terms of the structure. That may have brought out that demand of DLC.
Are you convinced even now that in terms of your strategy of going abroad, seeking an alliance with an emerging market operator, that is the way forward for Bharti?.
Absolutely. If you have to be a global telecom firm, we will get the size from India, and size and scale then allows us to take the business model outside India, where else but the emerging markets. We are here at the ITU (International Telecommunication Union conference in Geneva) talking to several African ministers, prime ministers and each one of them are looking forward to the low-cost business model being injected into the African continent. I think India, therefore, holds great promise for a lasting, solid, sustainable partnership in the telecom field.
I understand the second time around it was MTN that had approached Bharti and its bankers? Is that correct?
Phuthuma (Nhelko), the CEO of the firm, and I have been in touch constantly even after the first round. We are both peers in industry, leaders in our own continents. We were invited onto this deal. In fact this was Phuthuma’s idea that we restart the talks and we like to be invited. We are not a company that makes moves without being invited... Should there be more invitations coming through, we will talk.
Where would these invitations be welcome from?
I think our hand is known now. People know that we are keen to be in Africa, emerging markets. So I am sure bankers have taken notice of what we have done in the last four months. Opportunities will hopefully show up.
What are the learnings that you have picked up from the exercise with MTN?
I don’t think there is any hard and fast rule in engagement of such deals because they are significant deals; you never make hostile acquisitions, you offer a hand of friendship, partnership and what shape and size it takes will depend on the other side.
So you are ruling out any other possible acquisition, you go out and acquire a majority stake in any operator in the world, it won’t work like that. That’s what you are saying?
Without the blessings of the existing management and significant shareholders, no.
What is the future road map for Bharti?
It is business as usual; we carry on growing in the Indian market. We are in Sri Lanka and through Bharti Enterprises in two other places, Seychelles and Channel Islands. We continue to carry on moving up the leadership ladder in these places. A lot has to be done in India... India is adding over 10 million real customers in a month and to provide innovative services, new breaks for technologies, is something that we are looking forward to and in particular, we are waiting for the government to roll out the 3G auction process.
Will Bharti-Airtel only participate in the 3G auction or will you have a separate interest in the WiMax auction also, which would represent a generational and strategic shift for the company?
Discussions are going on with the people who understand this area very well. I am always in favour of standardized solutions. WiMax is not at a point where you could call it standardized... Let us see how the situations develop, but I personally believe that on a mass scale basis 3G HSPDA (high-speed downlink access packet)-plus will hold the promise of wireless in the country.
Your business as well as the entire telecom sector in India is seeing a situation where capital expenditure has to be maintained at levels that have been in the recent past but Arpus (average revenue per user) are falling. How does a company like Bharti Airtel tackle that situation?
All I would say is—the telecom business is, as you know, a deep-pocket business. You have to spend billions of dollars. To come to a scale where Bharti is, you have to spend $10-15?billion?(Rs47,200-70,800 crore). Most of the firms, when they come out of this long, dark tunnel of investments, come out battered and bruised. If you look at some of our competitors and their balance sheets, you will see a lot of debt on their balance sheets. I think one good news for Bharti is that after this long 10-12 year tunnel, where we have put out 100,000 kilometres of fibre, a number of submarine cables, satellite nodes and more importantly, 100,000 towers to cover 82% of India, we have come out in the pink of health with a balance sheet which is absolutely rock solid, almost zero debt and strong cash and revenue generation. So, I would say if there is any company that is prepared to meet with the challenges, including future investments, Bharti is the most ready.
A quick word on tariff. Currently we have one operator that has gone in for a per second billing plan, another operator yesterday announced a flat rate and said that per second billing doesn’t work. What is your take on that?
I think regulators have sensibly kept this sector on a forbearance basis. Given the intensity of competition in our sector, I think that is the right thing to do, just leave everybody alone. Everybody will ensure that they bring out packages, tariff plans, which are more suitable and attractive to customers so they can gain market share. The market is slugging it out. You see everyday somebody is giving you seconds, somebody is giving flat tariffs, somebody is giving long-distance concessions. All these things put together is good for the customers and let’s see where it goes.
Bharti had maintained almost two quarters back that it would not play the tariff war game. But recently it has actually perhaps started responding to the pressure that the market might be creating. What are we to read into that?
We have always responded. Right from the day of tariff reduction going back many years, we have always responded. We cannot be sitting on the sidelines and watching tariffs go down and we don’t respond for the benefit of our customers. But yes, we do not run this industry into the ground. We don’t take leads and make tariff plans that are hurting the industry.
Where will Bharti’s next 100 million subscribers come from?
If you give it a time of three years then it will come from India. But as you know, we like to do things on an accelerated basis. So a combination of India, plus something else, would probably bring it down to two years.
Where would that something else be?
Somebody has to come and approach us. We wait.