Focussing on gaining market share in both data & voice segments: Sunil Mittal

In an interview to CNBC-TV18's Shereen Bhan, Sunil Bharti Mittal spoke about the latest happenings in his company and the sector.

In the last ten years, we have seen a lot of growth in the Indian markets. More people have joined the mainstream of mobile communications, importantly in the last two-three years, people have moved from just pure voice and SMS to a data world, into being broadband customers, he said.

We have to capture most of the growth as much as possible to ensure that we maintain a solid market share, he added.

Capture more share of the growth and then hope that the tariffs will come to levels which are sustainable. Tariffs are clearly not sustainable currently, said Mittal.

Price of Rs 300-500/user will make for a sustainable telecom business, he further mentioned.

We are disappointed with the interconnect usage charge (IUC) regime which has come in, we expect some judicial intervention, we hope for that to happen. License fee, spectrum usage charges all these need to be rationalised, Mittal added.

Will do capex of around Rs 25,000 crore this year, he said.

Below is the verbatim transcript of the interview.

Q: I am glad that I caught you at this opportune time because the last I checked you were about 10 percent away from a lifetime high as far as Bharti Airtel is concerned. I was just looking at the data between 2007 and where we are currently today, Pan India operators in 2007, three, and now we have four; all operators in 2007 were nine, now we are down to four; industry revenues Rs 80,000 crore today were at Rs 1.76 lakh crore; your market share into 2007 was 30 percent, today it stands at 34 percent; the industry average of Average Revenue Per User (ARPU) was about 330, today it is down to 125; yours was 400 and now you are down to 180. It has been a decade of many milestones but what do you see as being the most significant change for you?

A: We have seen in the last 10 years a lot of growth in the Indian market, more people have joined the mainstream of mobile communications. Importantly in the last two to three years people have moved from just pure voice and SMS to a data world. They have moved into being broadband customers. I think from 2011-2012 when we launched 3G networks, so last four or five years, data started to become important; as devices have fallen, more and more people have joined the ecosystem. So, I would say consolidation in the market, we spoke that about in Davos last year, we are almost down to three plus government sector operator, four operators and a billion customers, most of them to be a broadband customers to be within this three or four operators.

Q: So consolidation has happened as far as the telecom industry is concerned. What about the churn that we saw on the pricing front? The market clearly seems to believe that the worst is behind, what are you betting on now going forward?

A: We have to capture the growth and most of the growth, whether it is in the byte of bits or voice minutes, we have capture all those as much as possible to ensure that we maintain solid market share. Then when the table starts to rise, which inevitably it has to rise because in the end everybody has to have an economic case. A very strong operator has come in, he wants to gain market share, he is bound to give goodies and eventually everybody has to have an economic case. So, the bet here is that capture more share of the growth and then hope that the tariffs will come to level which are sustainably.

Q: Tariffs currently you believe not sustainable?

A: Absolutely not, I mean you can carry on more bloodbath if you want, that we have seen around 2002, 2007-2008 when the more operators came through and we are seeing it right now. These are clearly not sustainable. Tell me which industry can survive in negative internal rate of return (IRR) or an IRR which is 1 or 2 percent, return on your capital deployed, you may as well put money in the bank. So it has to eventually come out of it but there are many business which go through this trough where you cannot get return but you do expect that eventually it will become okay.

Q: What could be the triggers than to ensure that you do get out of the trough? I mean just look at the ARPU picture and I talked to you about where you were in 2007 and where things are today, what could be the trajectory going forward given the disruption that we have seen?

A: I think the amount of data that India is consuming now and the free voice, and all services that are being enjoyed, an average of Rs 300 a customer per month or moving from Rs 300 to 400 a customer per month from where we are today, should be fine. Still India will be the lowest tariff anywhere in the world but will people spend let say sub Rs 300 to 500 a month on all that they can do on their mobile phone -- government services, civic amenities being connected, payments being connected; all of these for Rs 300-500 should be eminently possible and we will get there eventually. If you have that model then it works.

Q: What will need to be done from a policy point of view to ensure that you do recover from where things currently stand?

A: We are obviously disappointed with the Interconnection Usage Charge (IUC) regime which has come in. We have gone to the courts on that. We expect some judicial intervention, we hope for that to happen. But otherwise there is not much to be left. I would say licence fees, spectrum usage charges, all these need to be rationalised in the environment where you are auctioning spectrum and auctioning at very high prices.

Q: Given the fact that we have already seen consolidation taking place at the operator level, on the infrastructure side as well consolidation is expected, and of course even as far as Bharti Infratel is concerned, you very categorically stated that that is something that you are considering. How soon do you see that happen?

A: I think consolidation is happening. Indus Infratel is the tower company of India without a doubt. There will be one more tower company that will be merged. My own personal view is American Tower Corp (ATC) has made a big bet; after the turbulence and all it settles down -- that should be the second tower company. BSNL has mostly its own towers, it shares and takes from some others so you will have a stabilisation in the infrastructure sector also which is again good. Two solid passive infrastructure companies providing support to three private sector operators and then BSNL having its own towers, I think that is a very viable outcome there in the marketplace.

Q: What is going to be the focus on the priority for you at this point in time? We just talked about how things have changed and the kind of disruption that the industry is going thorough at this point in time but you are not stranger to that, so what is going to be the big area of focus for you?

A: I think just go out, build more networks; that is what we have been doing for the last three years. We have actually pressed on the gas even more this year. We are spending more money on capex, more networks are being build.

Q: How much money would you be spending?

A: I think Gopal mentioned yesterday Rs 25,000 crore, so, that is up from Rs 20,000 crore. This will be the highest single year of investment and thereafter I would say next year will also big but probably not as big as this year. My own view is when you are down to three operators, you will see a lot more sharing -- active sharing, fibre sharing, submarine cable sharing, and already some of that stuff has started to happen. So, you will start to optimise your investments as well going forward. Market stabilisation in next 12-18 months would also result in calming of the intensity of capex between the three or four operators.

Q: You talked about the kind of capex that you hope to put in, Rs 25,000 crore for this year, but let me ask you in the context of the general environment and whether you see domestic investment picking up and domestic investors restarting the investment cycle?

A: Telecom has been an exception, even in the last three years we have been spending absolutely solidly, all operators have been putting a lot of money. So, telecom must be given the credit that it has been fueling the cycle of investment. Other industries, infrastructure, roads, ports, and all are coming through now, but they have had several setbacks. Banks have not been allowing them to close their projects, money has not been coming out easily, the banking recapitalisation is a kick starter to that process, so I would say next one and a half-two years you will start seeing a lot more investment coming from domestic side.

Q: What about Africa, what is the sense on where things stand there and where you would be headed?

A: Africa has been a lot of work in the last two years, I have personally been involved. We are on one hand getting our operations in much better shape. The commodity shocks in Africa are abating, the currency shocks, depreciation of currency is abating -- those are macro environments. Our operations are getting better, we have a much better handle on our operations and then we are also fixing a hotspot. Ghana has been fixed, we are the second largest operator in Ghana after the merger, Rwanda, Kenya and one or two other hotspots that we have, will also be fixed in the coming days.