Dual listing was not the crucial roadblock to the mega-merger between Bharti Airtel and South African telco MTN, Akhil Gupta, deputy CEO of Bharti Enterprises, said, more than a month after talks between the two collapsed. In an interview with Nivedita Mookerji of DNA on Tuesday, Gupta blamed South Africa. Excerpts from a broad-sweep discussion:
Coming to MTN, is it all past tense now?
No, there’s nothing on MTN.
Don’t you think investment bankers advising you on the deal should have known about the outcome?
It’s an old story, why talk about it? But there are many things that nobody can predict beforehand, especially when it comes to the government stand. How can anyone predict that? It will be wrong to put the blame on anyone and say, ‘you didn’t predict it’. It doesn’t work like that.
Was the absence of a dual-listing provision in India responsible for the deal collapsing?
No, not at all. It was not dual listing. The South African government didn’t want a South African company to go into foreign hands and that’s why the deal didn’t happen.
In terms of M&A and expansion, what are you focusing on now?
In terms of our strategic intent, it very much remains. We want to emerge into other emerging markets. It’s the right thing to do. The MTN experience has only reinforced it and not weakened it. But there’s no hurry, we will wait for the right opportunity. Right now, there’s nothing on the table.
On the tariff vs quality of network debate, what’s more important?
In telecom, the customer proposition includes several things. There’s quality of service, network reach and distribution, and also tariff. Tariff is one of the elements — it’s an important element but not the only element. Therefore, if there is a tariff offering which cannot be sustained and people will crush under their own weight, its of no use to the customer. A customer wants sustainable service. And I think all these elements in a customer proposition need to be balanced. So, somebody with just one proposition will never win. You have to have a balanced approach on this.
Bharti followed rivals in per-second billing. What pushed you?
Per-second billing is just one of the plans. So there’s nothing very drastic about the per-second concept. Our view is that there are many aspects to the customer proposition. We strive to be the best on network coverage, network quality, distribution, customer service, products and application, innovation. As far as tariff is concerned, we feel as leaders we have no reason to be the lowest common denominator. But, we have to be competitive. That’s what we are doing — we are competitive but not necessarily the cheapest.
Where are we headed on telecom tariff?
Let’s first see where the telecom industry is going. Very clearly, this is the highest-growth industry today, still we are at a relatively low penetration level. Therefore there’s a long way to go. Growth is not hampered, the usage is very strongFundamentally, I think telecom is headed in the right direction. We are looking at the possibility of 3G (third generation) telecom services coming in, which will bring broadband on mobile, new revenue streams, new applications, new products that can be sold to the customers. So I think the telecom story is intact, growth is intact. As far as tariffs are concerned, this (price cuts) happens in competitive environment. As long as we can sustain our growth, provide for all the capacities and what the customer needs, we will be fine.
Will the 3G auction take place as scheduled?
We’ve already had the first pre-bid conference. The government seems to be following the timeline and there’s no reason to believe the timeline will not be kept. The Department of Telecommunications (DoT) has made it intentions clear to hold the auctions, the finance ministry wants it. So I see no reason for a delay in 3G auction. In the pre-bid conference, the DoT has ruled out the waitlist concept for 3G spectrum. Bharti chairman Sunil Mittal had sought uniform allocation of 3G slots to telcos across circles, even if it meant keeping some winning bidders in queue for spectrum... Actually, DoT has said that all the suggestions made in the pre-bid conference, including the waitlist proposal, would be considered. The whole purpose of the pre-bid conference is to take back comments or suggestions, consider it, and then come back. If it’s good for everybody, it should be considered.
Do you think 2G spectrum management and M&A rules should be clear before going ahead with 3G auction?
I don’t think so. 3G is a separate spectrum and the auction should go on. You can have any discussion on 2G. Obviously, both should be speeded up and both should be done. Let’s not wait for one for the other.
Will Singtel have a larger role in Bharti in the times to come?
It’s a very professional company and Bharti seeks whatever support it wants from Singtel in any area, like 3G for instance. It always consults whenever there’s a need but Singtel does not have a day to day direct role (in Bharti). Singtel is a very important partner for us, a strategic investor and is always available for any consultation or help.
Does the government want telecom companies to phase out pre-paid service for security reasons?
No, it has only happened in Jammu & Kashmir. That’s for security reasons, and is an extreme step. To our mind, that’s not the right step because more communication is good for every part of the country, especially where there may be some security threat.Even as it can be misused, its an acknowledged fact that mobile network communication actually helps in nabbing criminals. And I don’t think it’s right to say that the government is against pre-paid mobile service.
Do you feel the recent CBI raid on the Department of Telecommunications to probe the alleged arbitrary allocation of 2G spectrum would affect the sector in any way?
I don’t think a private company should comment on it.
What about the government-ordered audit into the books of telecom companies?
That’s one of the processes of the government. It’s the prerogative of the government to have these special audits.
Now that the Indian economy is coming out of the blues, does Bharti have any new plans for sectors other than telecom?
First of all, it’s wrong to say that the economy is coming out of the blues —- it never was in the blues. Our plans for the remaining sectors where we are engaged in like insurance, retail, passive infrastructure companies, absolutely remain intact. I believe that all these sectors will have their place under the Sun in the times to come.
In insurance, are you planning anything new?
We are present in both general and life insurance and they are picking up well. These businesses are very much linked to the economy. For instance, in India, life insurance is a preferred route for savings. The behaviour of the stock market and the debt market has an impact on the life insurance business. With that picking up, we are seeing people returning….. Also, because there’s no system of state protection, I think as people become more affluent and affluence spreads through every part of the country, the need for life insurance will only gallop. On the general insurance side, for a country that’s growing at 8% or 9%, you can imagine the kind of capital formation and asset formation that is required. And every asset that is formed needs general insurance. I think there’s massive scope for general insurance going forward. We are pursuing the insurance business with our partner AXA.
Since you are present in the retail sector and also have a joint venture with Wal-Mart for the wholesale format, do you see FDI being allowed in front-end multi-brand retail sector in the near future?
There is need for organised retail in India and I think that will happen. There is a lot of debate on foreign ownership. We believe foreign ownership in these sectors is not bad and there’s nothing wrong in that. This is not a security subject, and I don’t see why foreign ownership in the retail sector is such a big concern for the government.
Not much is being heard and seen on passive infrastructure sharing or the tower sharing business in the telecom business. Why is that?
Passive infrastructure by its very nature is an engineering kind of a company. Engineering set-ups are publicity-shy. But there’s lots happening. The sharing ratios are increasing quarter after quarter, month after month. All operators are now more or less decided to take passive infrastructure from the tower companies, rather than waste own resources.
What’s your view on consolidation in the telcom sector?
We are not looking at any specific targets right now. But we want consolidation and M&A to be freely allowed in the country.
Away from your businesses, what’s your view on the austerity drive for corporate CEOs, something that has been suggested by the government?
The austerity philosophy must be accepted in every walk of life and not only in CEO salaries. While opting for austerity, quality must be preserved and there has to be value for money. It’s important to keep in mind the input-output ratio. That is right austerity.
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