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The Rediff Business Interview/Sunil Bharti Mittal

'You can't survive as an island of excellence in a sinking sector'

'Divine intervention saved us twice from overpriced bids for territories'

What about Madhya Pradesh where you became the first private basic telecom provider in the country?

In the third round of bid for Madhya Pradesh, people said the Bhartis, jilted from Punjab, have gone to a lousy state - 'Madhya Pradesh is no Maharasthra or Gujarat'. But I looked at the state in a very different way. The 70 million population made no sense, out of which 30 to 40 million people struggle for clothing and shelter. So let's look at real numbers. There were 16 million urban people, which is two-and-a-half times that of Punjab. There is a vehicle base which is two times that of Punjab. The telephone revenue is more or less same -- there are a million lines in both the states, though per-line revenue of MP is lower than that of Punjab (it is Rs 800 and Rs 1,000 respectively).

We segmented the market, chose 23 towns and cities which would have given us the right kind of market. We went to IDBI and IFCI, but they said, 'MP, fixed line, no sex appeal, no value, nobody wants to put the money'. We showed them our plans, then they become convinced and were kind enough to fund the project. Today, that project surprises even us.

We are connecting 10,000 to 15,000 new customers every month. We have connected more customers than DoT this year in MP. DoT has a global presence whereas we are only a local player. My revenue per line is Rs 1,400 as compared to Rs 1,000 in Punjab and as compared to Rs 800 of DoT in MP.

We have a waiting list, this is unfortunate because we never geared up to connect so many customers. Against our booking of 10,000 to 15,000 every month we are now connecting about 8,000 to 10,000 every month. This may well become the first fixed line project anywhere in the world to break even in the second year. We will start making lots of money from the third year. We have proved international investors and equity analysts wrong and have showed that fixed line projects have a life over the next 20-odd years. Now everybody believes us because of the Internet and how fixed line telephony is crucial to deliver it. So Madhya Pradesh is a great winner for us.

Did the National Telecom Policy of 1999 come as a boon?

Everyone was talking whether the National Telecom Policy of 1999 would happen or not. We said who cares? When it did we were extremely happy with it and were the only company to say so. We had no licence fee obligation, everything was paid on according to the dotted line. So there was no scrambling or clammering for concessions from our side.

The result was that when we went and discussed issues with government, there was a huge amount of credibility. We have contributed a lot as inputs too for the formation of the NTP 99. Within our company we have often asked who will live if this sector dies? Lots of people say that you must be enjoying because 'everybody else is dying and you are OK'. But it doesn't work like that. Nobody is going to put money into me if the Indian telecom sector is in a bad shape. You cannot survive as an island of excellence in a sinking sector.

So people said if they have been able to survive the bad times we must support them in their good times. Warburg Pincus and Intel have been hovering around us, doing their due diligence for quite sometime. Now they love us.

What about the recent acquisitions of JTM and Skycell?

JT Mobiles came along. Earlier it had come and gone; we were never in a position to pick up such a big acquisition -- Rs 11 billion! And suddenly we thought why not, the money is there, the will is there, why not do it!

Madras came along, it looked great, and we bought it. Suddenly we looked big, and were no longer a North Indian telecom company. Now we have links from Himachal to Madras. The missing links are the ones between Delhi-Punjab and Delhi-Gwalior (the 150 km with parts of western Uttar Pradesh coming in between). Otherwise, we have the full run-up to Madras.

Is this a phase of consolidation?

I think so. With these acquisitions, we are unveiling our strategy now. Our plan is to be pan-Indian cellular player. We will be a national long-distance player. We will be a selective fixed line player.

How much is Bharti worth now?

Bharti Televentures, which is the holding company, will unveil itself through an IPO (initial public offering) in the middle of this year. On the present investments that have been made, our company's valuation has crossed a billion dollars. This is no bubble, no Internet, no eyeballs. This is hardcore revenue.

What about revenues?

We did about Rs 800 million last month (December 1999). I think we will close March 2000 financial with a profit of Rs 1 billion, which will make us a Rs 12 billion company.

I believe in our business, it will be silly to say, 'Give me a ten-year vision'. Things are changing too fast. But we knew -- even ten years ago -- that we will be a significant player, and we have more or less achieved that today. I can confidently say that ten years from now, we will have our values realised globally.

For a short-term vision: In the March 2001, we should have Rs 20 billion in sales up from Rs 12 billion -- it seems very reasonable and possible. We should have a one million customer base which is up from 400,000 this March -- our properties in Andhra Pradesh and Madras have hardly been tapped. We will put them on fire soon. And our market cap should be in excess of MTNL which is at $2.5 billion to $ 3 billion today. So these are some of our small milestones to be reached in the short-term.

Are there other areas that you are pursuing eagerly?

Everything we do is to give an umbrella cover. Take our VSAT venture for example. Today, if we have to give Internet connections to corporate customers, if we have to give them B2B (business-to-business) transactions on the Net, we may not do it; you may do it for us. But how do you connect your customers? Your customer will be horrified if he has to download at the current speed. So VSAT is an ideal medium.

We have more than 1,000 sites of various companies, where computers talk to each other through the VSAT system. So when I go to a client and tell him that we would like to have your account and that we can give him an umbrella coverage through VSATs, major cities through my leased lines, and mobile and Internet, then VSAT becomes an important part in our operations and strategy.

The only business in our group that is outside our core area is the healthcare which we started in 1984 which makes capsules for pharma companies. It takes very little of my time.

Also to support all our activities we have started a new company called Bharti Telesoft. Its purpose is to develop software for the telecom sector, web applications, e- commerce, and billing software -- all of which will help the needs of the group as well as outside vendoring. In fact, it has already got orders from Motorola.

The other project based in Goa is making ducts for fibre-optic cables. That company is booked for four years with orders from the UAE. Even in the Indian market, the MSIDC has used and laid about six or eight of our ducts by the Bombay-Pune highway which means that telecom companies wanting to get into long distance don't have to dig or do anything. They just have to blow the fibre -- which is the technology we offer -- to connect ends.

So you will stick to your knitting? You will not diversify into say hotels or airlines?

No, we will not. The Rs 10 billion is not what makes us the biggest company in the country. Our strength is pure telecom. Nobody is in it except say MTNL or VSNL. That makes us the largest private telecom company. So anything that falls within telecom or is even sitting in the periphery we would be interested in.

What about the Net?

We are on the Net with Mantra Online. But we will have to source content from outside. If you see the Mantra Online homepage, it is much better than what it was six months ago. But we are the crew cuts; you guys (rediff.com) are the ponytails and the earrings! It is not our job to produce content, and if we do, we will not be doing it very well. Our job is to plumb the network, wire things up -- we are good at that.

Is your listing going to be in India or abroad?

Abroad. We have yet to decide between the Nasdaq Stock Market and New York Stock Exchange. The process has started now.

There is some apprehension that the hype may soon end for Indian companies and the bubble may burst?

It may get over for some, it will get corrected for most, but it will not go away. This is for real. The only thing is that one day, somebody will say that Internet stocks will have to get us some money. They will have to have some revenue stream. Thankfully, telecom has not gone into that bubbly phase where you have valuations 124 times your revenue!

Part III: 'AOL-Time Warner type deals will happen in India, the next step is telecom companies will buy Internet properties'

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