Even if rates halve, we're OK

Starting this fiscal, Bharti Airtel’s CMD Sunil Mittal began a process handing over the strategy functions of Bharti Airtel to the company’s President Manoj Kohli. The process will be over by the end of March next year. Excerpts from Kohli’s conversation with Sunil Jain, where he explains the changes he has in mind.

What’s the big change you have planned?

The idea is to build a business model that makes us profitable even when voice tariffs fall to a cent (45 paise) a minute, from the current two — you saw what happened on long distance with MTNL two days ago … this sort of stuff will keep happening. Face it, India is, and always will be, a low tariff market — in the US and Europe, tariffs are 25 cents a minute, and even if allow for purchasing power parity, we’re among the lowest globally.

The other big plan is to complete the process we began in March — to become one brand for all customers. A customer should, for instance, get just one bill, for wire or wireless services. Within two months, customers will even get combined tariff plans for various services. When a customer walks into any of our 1,000 showrooms across the country, he/she should be able to get all products there.

Integrating our 10,000 permanent employees, many from different organisations, is the other big challenge.

How long will this process take?

About two years. We’ve already integrated all our different platforms at the back-end … you can get all data on customers across the country in just one Intelligent Network (we bought the Rajasthan circle that had a different system and within nine months integrated this with the rest), one CRM solution, one billing package.

A one cent plan .... Will your costs come down, or is it non-voice revenue you’re looking to grow?

Obviously there will be cost savings as we reap the scale economies. Don’t forget, this is the first year of us being truly national players. What I’m talking of is increasing non-voice through our concept of VAS (value-added services) for mass.

Isn’t there a fundamental conflict between mass market and a large non-voice business? Will non-voice rise to 20-25 per cent as it is in countries like Indonesia?

VAS for mass is not the Blackberry kind of service, that’s very niche. VAS for mass includes ring-back tones and, even today, you can buy single tracks wirelessly. Do you know 40 per cent of our customers buy ring-back tones? Then there’s easy charge, there’s mobile wallet. Our broadband is doing very well, we have a fourth of the market — we’ll be launching IPTV soon. As for voice-versus-non-voice, I can’t give you a ratio, but India’s a completely different market, so we don’t have to follow global models. Our non-voice revenues are 10.7 per cent of total revenue. But voice will continue to remain the killer-app for a while.

How has easy-charge fared? And isn’t mobile wallet a failure?

Easy charge has done very well, nearly 70 per cent of our pre-paid users use it — pre-paid, in turn, is around 80 per cent of the client base. Once you have a pre-paid, you don’t buy recharge coupons, but get your shopkeeper to send you the recharge through an SMS … you can do this in the shop, or just call him on the phone, much like you ask the grocer to do home-delivery today. Mobile wallet is a collaboration with ICICI — so each time you pay with your mobile phone, your ICICI account gets debited. We began in five-seven towns, and it hasn’t taken off so well … perhaps because credit cards are so easily available.

Every phone company offers such non-voice stuff — Hutch got push-in mail much later than your Blackberry, but it’s a lot cheaper. They offer ring back tones … Is the advantage sustainable?

A critical component of our new organisation is the Content Factory, this is the long-term differentiator and is a collaboration between marketing and IT … it is on the lines of NTT DoCo Mo in Japan that has 500 content partners.

Is your exclusive tie-up with Blackberry over?

No, both sides are very happy with the growth, and we’re even getting SMEs to use this. Others may be cheaper, but we’re better — in this market, it’s not so much price as quality. We haven’t put a date to it, but the exclusive arrangement continues. We’re working on options with Microsoft and Ericsson for a mass-market email solution that can be offered on all phones.

Like what Hutch offers today! If India’s a low-tariff mass market, how does 3G fit in? Even if you can get more voice capacity on 3G, the handsets costs a lot more. So is it worth it to migrate to 3G for just a handful of customers, the 40,000 or so that use Blackberries today?

I’m quite happy 3G didn’t happen a year ago, and by the time we get it next year, costs of handsets will make them more affordable. Singtel has just 1.3 lakh 3G customers of its total base of 16.6 lakh; Vodafone has 9 million 3G in a base of 179 million.

If the government gives spectrum in the manner suggested by the Telecom Regulatory Authority of India (Trai), Reliance can offer 3G. How will this affect you?

The government has to provide a level start for everyone. But we’re offering EDGE even today and speeds there are very good, so I don’t see a major issue on the consumer end.

Your company opposes spectrum auction on the ground that the bids will be astronomical. But if you design the auction well, like fixing a retail tariff ceiling, the bids will be reasonable. Also, the whole fight of the relative spectral efficiency of CDMA and GSM will be over.

Do it any way you want, if Rs 1,500 crore or whatever is paid, it has to be recovered.

A government survey shows you have the worst record when it comes to verifying pre-paid customers.

I haven’t seen the report. I get complaints from the other side, that we’re being too strict in verification.

What are your expansion plans? In rural areas? Have you got into infrastructure sharing?

We’re in 3,778 towns and will be in 5,161 census towns by next March. We’ll cover all villages with a population of over 5,000 by the end of the year. The number of new towers we’ll set up will be 20,000 or double of last year’s. We share about 30 per cent of all towers, and have made progress with MTNL — talks with BSNL are still on.

So this will stop your rural march?

We’ll have 45,000 km of optic fibre by the end of the year. In other areas, with microwave, we can manage.