Bharti Airtel sees room for growth in rural India

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Bharti Airtel sees room for growth in rural India

In an interview with CNBC-TV18, Sanjay Kapoor, CEO, Bharti Airtel, speaks about the latest happenings in his company and sector.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Sanjay Kapoor takes over as Bharti CEO ahead of schedule Zain deal: Bharti executives to visit Africa this week Sell Bharti Airtel: Anand Rathi Securities ALSO READ See latest News about Bharti Airtel See previous management interviews See what other Experts & Brokerages are saying about Bharti Airtel Bharti Airtel BSE | NSE 29/05/12 Are Mutual Funds betting on Bharti Airtel?

Q: In the quarter that you just reported obviously revenues were under pressure in quarter on quarter terms; revenues, profits, margins, minutes of usage, ARPUs everything had ticked lower quarter on quarter. When do you think you will be able to reverse the trend, given an idea that you may have of the sustainability of the industry itself?

A: I am very surprised you say that because I would tend to agree with you that revenues were a bit under pressure for the industry per se, but that was a phenomena created by the price declines which were very huge in a very short span in time. But when you look at the usage and customers, I do not think there was any slowdown over there. If at all in the last quarter there was a big upsurge on the usage on the customers, in fact we alone added about 10.5 billion minutes to the network that by any standards is one of the biggest additions that could have happened.

Q: I meant in terms of minutes of usage in terms of ARPUs (Average revenue per users), you did see the pressure coming in on those counts as well. Do you see those reversing?

A: ARPU as an index we had challenged many years back. We believe that in a country like India as you proliferate from bigger cities to smaller cities, the ARPUs bound to decline because you will keep getting marginal customers. I think we have always believed that in a country like India you need to create a minutes factory that can cater to every marginal customer. So for me a customer whether he takes 20 or 100 minutes on the network is good to be served. So I do not think ARPU is a phenomenon that holds well in a country like India and we do not follow that index at all.

Q: Answer these questions in a quantifiable fashion, what percentage growth do you see in customers? What percentage growth do you see in sims? What revenue per customer do you see going forward? What profit per customer do you see and where do you see an inflection point where the usage is going up, but the prices coming down and at some point it's even-steven, so you are not growing anymore?

A: These are not so simple to quantify questions because it's all a question of interpretation. You are talking about sims increasing in the hands of customers today. Tomorrow telcos are going to be selling machine to machine application; there are going to be applications in the area of commerce, in the areas of entertainment. So each customer is going to be loaded with multiple sims for various applications. Therefore, sim growth is never going to come to a standstill in this country for many years to come.
By even the growth rates that we have been witnessing over the past, last year I think the industry grow over 30% in terms of number of customers, I do not see those trends slowing down in future. I think those trends are very sustainable and continuing.

India has no destined to reach a billion customers in the next few years. We are at a halfway house, a little lower the halfway house today. I think by any estimates or any guesstimates that various agencies have made, I do not think that number of one billion customers is been questioned. So that will happen to India. It's a matter of time you could be a few months here or there.

Q: What can you update us in terms of the Zain acquisition? There has been an S&P note which has put you on negative rating watch. The stock prices also reflecting potential pressures of debt. What can you update us in terms of what pressure you expect on the balance sheet or at what point, anything that you share with your investors that you can share with us?

A: Nothing as of now. We are undergoing a process. As long as this process is on, I will not be able to share any intricate details with you.