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"In 2022, the Telecom Network Will Start to Shift Into Space"

It's been a bloodbath in the Indian telecommunications sector but Sunil Bharti Mittal, Founder and Chairman, Bharti Enterprises, put up a formidable fight
Raj Chengappa & Shwweta Punj | Print Edition: January 24, 2021
Sunil Bharti Mittal, Founder and Chairman, Bharti Enterprises -- Photograph by Bandeep Singh

In a tell-all conversation with India Today Group Editorial Director Raj Chengappa and Deputy Editor Shwweta Punj, Mittal talks about how the pricing war unleashed by Reliance Jio is badgering the sector; how Bharti Airtel is inching back into the saddle of profitability and why Budget 2021/22 should focus on those at the margins and not on corporate tax cuts.

You have stayed focussed on telecom. Are you thinking of getting into providing content and other such services?

There is no service provided by a telecom company in the world which Airtel does not provide. Yes, we don't produce our own content. We don't have our own studios but we have tie-ups -Amazon, Netflix, Zee5. We will never be good at doing stuff that others do better than us. A classic case and I can reveal it today is the AT&T-Time Warner acquisition. When that happened, I straight away spoke to the AT&T CEO. He said the world has changed, smartphones have come and you will be able to groom content for mobile phone screens.

He told me he would ensure that Time Warner and AT&T are hundred miles away, in terms of no-interference. But once you take over a company, the acquirer starts to put his people. That acquisition hasn't gone down well is the only example I can give you of a telecom company going for a big bet in merging together what you call a platform kind of activity. I think the jury is out, and I am yet to see one case which has succeeded globally.

Reliance Jio is a platform. It is into e-commerce, it is also selling mobile phones. What do you think of such a model?

He has different businesses - e-commerce, retail and telecom. They are businesses with different shareholdings. If we confine to the Jio platform and Reliance Jio telecommunications, there is nothing that we are not giving to our customer today that they are giving. Google works with us on multiple fronts. Amazon and we are very tightly stitched together. There is nothing that we don't have.

It seems near impossible to have a conversation without a call drop. Why is that still persisting?

Call qualities have fairly advanced because most calls are not going to regular circuits. They are more or less on data pipes. If you have a smartphone, 99.9 per cent you will be going on data pipes to make your call on circuit switching. We are seeing tremendous improvement. Statistics tell us now there is a rare case of call drop.

What are the big lessons from Covid? What big changes do you expect in 2021 both globally and in India?

Telecom emerged as a hero industry during the pandemic. Airtel and our competitors stepped up to the job. The traffic pattern shifted from offices to homes within days. The way traffic surged, networks would have normally collapsed. But our people were out on the streets with complete disregard for what could happen to their health. In many places, electricity was a problem. I would say this has been a game-changer, it accelerated the digital world and as Nandan Nilekani rightly said what could have happened in years happened in weeks? and it is true.

We put up more radio sites, connected more fibre immediately. So, I would say going forward there will be a fundamental shift towards digital consumption. I feel there is going to be a permanent shift in the world. There are several question marks - work from home or partly work from home or reinstate office? What will be the form and shape of high street retail?

What big change do you see in telecom during 2021?

2021 will be more of 2020 but on a larger scale. All ongoing work in rural areas will be complete; 4G coverage will be complete, more fibre will come through and networks will stabilise. Probably by end-2021 we will start to think of 5G and in 2022 you start laying down the foundation for 5G. It is a completely different ecosystem. For the first time, the industry will have the capability of offering customised speed.

In 2022, the telecom network will start to shift into space. Our new project satellite services will be in India by 2022 - from the Himalayas, deep deserts, to our security agencies, any place in the world you will have satellite communication.

Reliance Jio has talked about a 2G-mukt Bharat. Where do you see this argument going?

We made a statement that we agree with that and must transform from 2G to 4G in the fastest possible time. Thankfully we have taken the 3G layer out completely.

Every month few million customers get converted to 4G, so it is happening. In 2-3 years, we will be able to completely afford 4G.

There are many restrictions on 5G, especially on Chinese equipment. How do you see that panning out?

If you take China out, there are two players - Nokia and Samsung. So it will create some pressure on pricing. That is where the Government of India needs to ensure we create an ecosystem to bring in more manufacturers. The Cisco, IBM type of companies needs to start in this area. For 5G in any case we have made up our mind to go the western way.

What would you like to see in the Budget?

Fiscal space is restricted. We are a large nation and have limitation of money. So, the government has a very difficult job at hand. The industry should not expect any concessions in terms of tax reliefs. What we should hope is that the Budget directs a lot of money towards infrastructure development. People who have lost jobs should be a focus area. There is so much capital available, interest rates are low, so industry will manage. Small and medium industry needs support, so do people in the margins. So, give them support and put lot of money into infrastructure.

You have finally reported a profit. What did you do to turn around?

This has been a very difficult journey. On days when you are tired and exhausted, I wished we were a different industry where you didn't have a competitor as strong. But you don't control the hand that is dealt to you, you have to claim the hand that is dealt. We are grateful to the Lord. I would have been very bored if I was in the steel industry. That is not in my nature and so in some sense I got what I wanted.

In 2002, we were almost given up by the world. The question was when will they collapse? Our share price was down to Rs 19 from Rs 45. From there it went to Rs 1,200 in 18 months.

In 2016 we launched discounted pricing. Out of a dozen-odd players then, eight or nine are not there today, and some from very big houses are struggling. One is of course the big competitor. I think we have done enough. I was clear that the storm will pass and we did emerge strong. We kept our head down, this has been the play-book we have followed earlier too. Our institutional strength is very, very good, the brand is very good, and so is the ethos and passion.

What did you do to push up your revenue this time?

We focussed on customers. We stepped away from having the maximum number of customer networks, and opted for a minimum charge of Rs 35. We made adjustments and the quality of customers went up.

What about hiking tariffs?

We are in an intensely competitive industry. Before the new competitor came in, average revenue per user was Rs 272-280. It has since gone down to Rs 130-140. We are on Rs 160 now and it needs to get to at least to Rs 200. Eventually, the nirvana of this industry to put money into networks, 5G and beyond is Rs 300. At Rs 300, we will still be the cheapest provider by far in the world. But I see no reason why people who could afford Rs 500 should be paying Rs 150.

Has Reliance Jio agreed for a price increase?

The industry's return on capital is very dismal. While we are saying we have turned profitable, the fact is when we have spent Rs 4 lakh crore - you need to have some return on capital. We have investors. We need to invest more in the network. This industry needs a lot of money. Unlike the steel industry or petroleum refinery where you put up big capex and then you have small maintenance, here every year you need to spend about Rs 20-25,000 crore on towers, fibre and spectrum. It is a never-stopping process. You need a lot of good returns to keep on? if you look at the record of Airtel, how much dividend it has paid over the last 25 years, it will probably be lower than the smallest industry out there.

What next?

At 45, I would have told you I am going to politics and that was always my dream. At 49, I had lost that direction and I think that is something I will not do. But to do things which have high impact, which are new excite me. Public service excites me. Business is a kind of choice I made because I had no other choice. I was not well-educated, I was not an engineer or a doctor. This is the only thing I could have done.

You didn't want your son to succeed you in this business?

To be honest, this company was never designed like this? it is a rare company. Otherwise, you will never see any other Indian founder's company where friends and families are not integrated. This is a meritocracy driven organisation. Are they not qualified? I would not say that. They are also trained, but you can do what you want. As I get to an age I would like to step back from day-to-day work. They would be most welcome to come and take responsibility at the shareholder level. They must because that is what they are going to inherit. But if they want it at the managerial level it is their call. I wouldn't paradrop our children to boards. We must ensure that the company is professionally and meritocracy driven.

There is a buzz that you might concede majority rights to SingTel and move out of the business?

They have never come and approached me. I don't think SingTel can run this company as well as we run it, they have acknowledged that. They are good partners for past 20 years. But this company is publicly listed - our stake is down to 36 per cent, we have raised a lot of capital. I am sure our family will inherit the shareholding.

@rajchengappa; @swwetapunj

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