Unitech to focus on Mumbai market, debt reduction

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Q: This has probably got to be the worst year as far as telecom is concerned from a company's stand point, from a consumers' point of view it is perhaps the best year. Do you think that this is the wrong time for you to have made a foray into this market?

A: It was not a surprise to us that a price war would start.

Q: This degree - pretty much the roof where pricing can actually head?

A: If you look at the incumbence in profit margins, they are still in excess of 40%.

Q: But look at Bharti's market cap, where it was and where it currently stands.

A: As profits come down, market caps do get affected and we did not incorporate 40% of margins in our business plan.

Q: What did you incorporate?

A: We cannot talk much about that but we have built our business plan on a 10-15 year horizon. Next one-two years there would be a price pressure in the market and new definitions of pricing will start.

Q: What is the internal timeframe by where you feel that okay, we have to stop bleeding at some point?

A: I think three years our forecast is we will be EBITDA breakeven.

Q: What has the response been in month one for you?

A: I think it has been very encouraging. We are surprised and we are very happy with the scale of the launch - what we did was an 8 circle launch. In terms of pricing plan also most of the analysts have credited us with not joining the per second club that we did a smarter plan where we are going after a segment of the market which is a higher user. We don't want to go after the people who are just using it for Rs 50-100 or we don't want to be the secondary SIM card. We are aiming to be the primary SIM card.

Q: People wondering whether this is a long-term play for you, is it just the three year lock-in that you are going to live by and then life changes for you, is it going to change or will you continue to hold on?

A: We definitely want to continue to hold on for several years and we feel for the next five years with the growth which is expected in the market with the number of subscribers expected to double, we should not be in a hurry to encash any investments.

Q: But you will look at encashing? This is not real estate for you, is it?

A: No, this is not real estate for us, it won't be encashed in the medium-term to the short-term.

Q: But when you get the right time and at the right price?

A: Right structure, maybe it is something which could be listed separately in India, maybe there will be consolidation happening in the industry in few years from now. We would look at all options at that time.

Q: But you have no qualms about saying that that is eventually going to be what you are going to look at?

A: Eventually we evaluate everything in our portfolio be it a property, be it investment.

Q: You just said that you are open at the right price at the right time.

A: Not just the price, at the right time. We feel lot of value will be created over the next three-five years and before that for us to do anything will be shortsighted by us possibly.

Q: Getting back to real estate, since we are seeing a sort of pick up in terms of confidence and demand, is this going to be the time when at least the big boys like you go back out looking at acquiring land?

A: We are looking at land again. But selectively in markets like NCR and Mumbai only.

Q: So in terms of targets that you have actually set, are you no track to meet those targets in terms of developing?

A: Our target was to launch about 30 million square feet this year. We should have crossed about 22-23 million square feet already. Our bookings were expected to be 20 million. We are on track for that and the key has been that we have been realistic on pricing.

So we have actually gone out and launched projects at slightly below customer expectations. So I think that has been the key.

Q: Will that be the trend going for you as well?

A: I think so. We will be able to bring in product at the prices or slightly below prices which the consumers are willing to pay for and that will bring us faster return on capital.

Q: What is the target that you are working with in terms of return on capital employed?

A: At today's acquisition cost of land, we won't look at our historical cost, we would look at at least 30% IRRs.

Q: You have been in this business, you could have been doing something completely different, you were in the US doing garments and then you decided to move back to India and do real estate, you think you have made the right choice at that point?

A: Definitely. I think timing was perfect. I moved back in 2001 and living in New York city we have moved just about a month before 9/11. So it was good to be away from there but after that we haven't looked back at all.

Q: What is this business taught you?

A: Lot of patience. I think it has taught us to fight. Last one year has been lots of ups and downs like a scary rollercoaster ride but I think if you are fair with your people and your intentions are right, you can come out of anything.

Q: How closely do you monitor your stock price?

A: Not very closely but end up seeing your channel a few times.