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The Rediff Business Interview/Sunil Bharti Mittal

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

Part I: 'Divine intervention saved us twice'
Part II: 'We will close 99-00 with a Rs 1 bn profit'

Where do you see the next revolution in telecom happening? In long distance telephony or in value-added services?

Long distance is almost opened up. Licences will come by the middle of this year. Projects will be off the ground starting next year. But this is no revolution. This is an old story taking place here. It's a good place to be if you are in telecom but the revenues which are there now -- around Rs 60-70 billion -- will disappear. There is no question of that. Long distance will become a commodity. It's a monopoly now. Give it in the hands of four people, they will bash it to death. You will have STD calls from Delhi to Bombay costing only around Rs 5 to Rs 6!

Even the international gateway will become a commodity. I am already running a gateway in Seychelles, and the only Indian company to do so. And even there, we have slashed the prices by two thirds and are still profitable! Gateways, pipes -- 20 people can run that; 100-200 people can run and maintain long-distance projects. All you will be left is with 15-18 per cent of the market-share of the Rs 60 billion market. All these will become commodities.

So how do you plan to increase revenue?

What you need is value-added services -- whether its e-commerce, Internet, data applications, call centres. The challenge is going to be connecting people. The hurdle bar is going to be very low. But imagine if I have 5 million customers and I don't have my own pipe and come to you. Two things will happen. One I can have a sharing arrangement with you which could become very difficult later on; two, my customers may even bypass you because they do not need to use you. So it's a very tricky situation.

But if I have my own pipe, my customers will never leave me. The dial tone in the long distance business is going to become very important. So by default when I pick up, if the dial tone is friendly to me, there is no question that I will ever make a three digit code to go somewhere else. In fact, even if the dial tone is more expensive, it has been seen that 80 per cent of the people don't change because it is too much of a hassle doing the three digits. But who will ensure that it is competitive?

What is the theme today? Converged technology on an end-to-end basis. A customer should not go to five people. Your Internet at home should become the Internet on your mobile. We have seen one side of the convergence -- AOL merging with Time Warner. You will see similar examples here too. The next step is telecom companies buying Internet properties: we will deliver, you provide the content. It is happening now in America and Europe. In India, it will take longer, say a year or two, for similar developments to take place.

If convergence is inevitable, where do you see Bharti in the future?

We will offer all the services. There are two main strengths we will have. Firstly in the mobile. We want to be a seamless mobile network in the country, at least in states which matter. So when our customer goes to any of these states, he or she should hear, 'Airtel, how may I help you?' so that he feels at home. Today, when my customer goes to Madras he can't relate to Skycell although I have a roaming arrangement.

Secondly, the rates differ. It is Rs 10 per minute in Madras; in Delhi, it is Rs 4 per minute. If I can tell him that there is Airtel wherever he goes, the same number and same tariff, we will have an edge over everybody else. Look at Vodafone trying to buy out Mannesman. It is trying to do the same things, create a larger footprint. Customers who are accustomed to large footprints will not leave you; rather new customers prefer a provider with large footprint.

The other development is providing Internet data on the mobile. Banking, buying tickets, horoscopes, pictures, video, etc, -- this is the lowest end of the telecom food chain. As soon as the mobile handset becomes more powerful, we can pump in a lot of stuff.

You'll be surprised that even without advertising we are doing about 100,000 messages a day. This will shoot upto a million messages a day when we start advertising the service.

The next step is to do e-commerce through your mobile. If you are an e-commerce guy you will say I have 5 million customers, let us share revenue whenever they use my product . We are already being courted for alliances. The biggest strength we have is that we are a powerhouse owning and linking customers. The biggest strength of a telecom company is owning the last mile to the customer.

Let us move to fixed mobile convergence. Same number at home. As soon as you come in , you can dunk your mobile into the docking station; your fixed line becomes the same number, your calls get transferred. You move out of the house, and pick up your phone, and the number follows you. This is already being tried and tested in the UK. So for an Airtel customer he is networked end-to-end seamlessly and doesn't have to be bothered about long distance, international calls, Internet , data - it's going to be one number wherever you go.

The next stage in the Indian telecom sector is going to be mergers and acquisitions -- consolidation isn't it? How are you going to be protected?

I think for sometime this 51-49 per cent formula of equity holding will stay. Foreign companies will necessarily have to tie up with Indians. They will not be allowed majority stakes. Therefore, for some time I see Indians will have to run the consolidation games here with support from their foreign partners.

BPL should be a natural candidate to do something; they have three or four properties now; Escotel has three properties; Reliance is an enigma -- if they want they can do it, but I don't know what their plan is. All other individual or twin properties will disappear. My feeling is that you will see DoT, MTNL, VSNL plus three more companies in the country. There will be about six telecom players, not 40 like today. There will be a lot of acquisitions and consolidation in the next few months.

What about policy? Is the new look TRAI as confused as it as before?

I think the policy is in its home run now, it's in the last lap. Whatever comes out of it in this lap is the end or at least something that is going to be with us for quite sometime. The Jaswant Singh Committee made a huge impact -- migration has taken place, government has issued a notice about the licence fee and duopoly has gone.

Two things remain. One is the regulator. There has been a strong resistance from DoT and others not to have a strong regulator because they believe the ministry of communication should do the job. But it is an accepted principle both within the government and the industry that there has to be an independent regulator Arun Jaitley who is heading the sub-group on regulation should be making an announcement in the next few days.

Then there are subsisting problems arising out of the earlier committees which is being looked into by Montek Singh Ahluwalia. They will take a couple of weeks before coming out with their final recommendations which will be studied by Yashwant Sinha. By mid-February, I can see the final recommendations in place.

Today, the environment is so conducive that the government can only think of making things better. The country's IT dream will fail if telecom is not in place. Today, India can be the major hub for all the call-centres but you need a strong pipe and strong local networks. Why should British Airways or American Airlines do any of their back-office processing work there when it can be done here cheaper?

But our poor telecom infrastructure is coming in the way. As I take you out of the Internet, I stumble because of the lack of gateways and the clogging of VSNL's facilities. Everybody says it will come, but when? I think the Sanchar Bhawan syndrome is at work. If you see from their viewpoint probably they are right -- there is a Rs 250 billion revenue which they are sitting on, there is a $30 billion valuation: so they want to do something before they lose. But the point is that they have taken far too time to reshape and restructure themselves. Now there will be shock therapy when they see that half of their Rs 70 billion of revenue from long distance is gone.

What does it take personally to create all this? Do you still get time to play squash?

No, I don't. We have long hours but they are marked qualitatively. Our one day could be equivalent to 10 days of other business houses. Everyday our aim is to add to shareholder value, improve our strategy, understand the technology better.

Was it given on a platter by your father? Or are you a first generation entrepreneur?

My dad was never in business and I had to learn the ropes myself. I started off in 1976 with about Rs 20,000. I got into bicylce part manufacturing which is what everyone does in Ludhiana! Either that or hosiery! We had a small little forging unit, me and a friend from school.

So you always want to get into business?

There was no choice. I was very poor in studies, and I couldn't have got a job anywhere else. So where was the choice of doing anything else? Moreover, in Ludhiana, everybody does business! I did bicycle parts, a little bit of hosiery, stainless steel utensils. I was very impatient and couldn't stay with the same thing. Even now I cannot stay in operations for long. I spent a year in Airtel hands on, and that was it. I go there only twice a year now. There's got to be a new project, new challenge, got to be a new place.

Is it important to run twice as fast to remain in the same place now?

Absolutely, I think even more. I don't give myself, unlike many others, a lifetime to be here. I am 42 now and hope by 50 this group should be very big, self-sustaining, with lots of professional people doing a great job. And I should hopefully be doing something else! At 50, I can tell you that somebody else will be running this company. What's the fun in doing the same thing again and again? Now at least there is a challenge in getting new cellular projects and integrating them, but later on that's not going to turn me on…

So what gives you a high?

Size. Bharti has to be one of the biggest telecom players.

But size for what? To sit across British Telecom and do deals?

Oh, that we are doing even now. But it's something more, something bigger. It's like asking what's your kick? I see women getting very fascinated by diamonds; I have not been able to understand that. Why would be a fat ugly woman be bothered about a big diamond? She'd rather take care of her body and look nice. But there is some unexplained passion for diamonds. You see lots of people crazy about their gardens; I can't understand that either. Some are crazy about where to eat in the evening, some have a kick for brands like Armani; I cannot relate to that. They are not wrong.

Similarly people do not understand what I do and why I should be there till 12 midnight, spending about 18 hours a day in the office. But that is my kick. When I create something from $800 to over $1 billion in 23 years, that's my kick. When I come into the office and sit in this chair, it is not pressure but fun for me. I look forward to coming here everyday. It is not for money. I have made enough money to live a king's life and lots for the next two generations. I just cannot go home and sit down and do nothing.

Is this how your contemporaries also feel? Is the old system of Indian business maharajas accumulating wealth, collapsing?

The order is changing very fast and it is hurting the oldies very much. Sunil Mittal is still in the second rung -- you can see the Narayan Murthys, Azim Premjis, Subhash Chandras and the Naresh Goyals bringing the new order. The writing is on the wall. It was led by the Ambanis who have redefined Indian business. I still remember when Vimal started in 1974, people said forget it, and Dhirubhai said I will be the biggest industrialist. Not many people could believe it. I didn't believe it. But he did and changed the order.

In contrast, the big business houses in the country have collapsed, literally. I have seen people moving out of their big bungalows to farm houses. Who are the people buying big houses today? They are not from the old business families but the new entrepreneurs. The oldies are cutting expenses, and are no longer having lavish expenditure. If you visit their houses you can see that the house they live in is looking unpolished, and uncared for. The change is amazing.

And they are not able to cope with the change?

No, they are not. They were never brought up like this. For me today if I have to go to Ludhiana standing in a train for four hours, I still can do it. I have done it many times. That is because we have seen life in a different way, sitting in trucks, sitting in the docks waiting for our imported material to be cleared. If you want me to file a bill of freight today, I can do it; if you want me to go and speak to the customs officials, I will. Today, I don't have to do it, but the appreciation of the overall business gives you the necessary tool to create that vision. Vision is not something that happens -- that you wake up one morning and get it; it is built by a lot of small facts that your mind keeps collecting and then assembles it.

Is there also a change in approach now? The emphasis is not just on creating factories but wealth through market capitalisation.

Yes and no. Asset-based industries are no longer in vogue. But I think we should not mix up the two things. We need asset-based industries -- you need chemicals, steel textiles, cement --there's no question about that. But every country and continent has had some good runs. The industrial revolution, for instance, and within it the subsets: Japan flourished on electronics, early Europe on steel and textiles, US on hi-tech. India can never compete in steel or chemicals. Our agriculture has done well but it will first have to meet our own population demands.

I think that what we will be good at is in infotech, software and services -- this is a natural fit for us. China is no competition. If our politicians and bureaucrats don't screw it up, India can be rightfully delivered to its citizens. This revolution belongs to us. Thankfully, the bureaucrats and politicians have realised this and are leading from the front.

Willy-nilly, wealth and valuations will come to this sector. Let me give you a personal example. Airtel was run with a passion and madness; every morning we used to plunge into it. Mantra is a very successful ISP, it's the second largest after Satyam. But I couldn't plunge into Mantra the same manner like I did with Airtel. But Satyam Computers did that with Satyam Infoway. Which is why I am not successful as Raju is with his Internet venture. It's a similar case with large business houses. People say they are big and have the money so why can't they create a successful telecom player? But you need to have the passion to do that in any business.

Why cannot people share this passion and create it for you?

It doesn't happen like that. I tell you Mantra is a classic example. Sometimes I feel that had I run Mantra and done nothing else I would have taken it through the roof. Not everybody can have passion. So you must clone yourself, have two or three highly passionate people who can run the business for you. But more importantly, you must see where your eggs are nesting. For us they are in the telecom basket. Suddenly because of the Internet bubble, we can't leave that. The good thing about us is that there are no hotels, no airlines, no hospitals. It is only telecom. Now if I suddenly see these nice orchards in our journey -- an Internet there, an e-commerce here, I don't jump off. We are there in a manner of speaking. So thankfully when I wake up in the morning, I don't say, "My God, what do I do with my steel plant!" I don't get distracted. I don't want to leave my focus.

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