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Mittal: India Story Occupying Centre Stage at Davos


Vodafone Idea need a patient investor with the financial capability to endure negative cash flows for a number of years, according to Sunil Mittal, chairman of Bharti Enterprises, and an immediate influx of $7-9 billion in capital. During an interview with Sruthijith KK conducted on the fringes of the World Economic Forum Annual Meeting in Davos, Mittal stated that while 5G has imposed a heavy burden on telecoms without yielding any money, ARPU (average revenue per user) must be increased. Selections that have been edited.


How is everyone feeling in Davos right now? When compared to prior years, is it more optimistic? Is it gloomy instead?

Neither depressing nor uplifting would describe it; it's a little of each. As long as Russia and Ukraine are at war, there will be a great deal of geopolitical uncertainty.There is a lot of mental space taken up by the Middle Eastern conflict as well. Regarding India, it's no longer about selling "the India story," but rather about taking advantage of chances that present themselves.


Investors and potential customers are interested. Since we were painting Davos with the Incredible India campaign—which has been going on for over 23 or 24 years—we have reached a stage where selling is no longer necessary. The focus has shifted from price to opportunity, the areas where the action is. The fact that India's investments in public infrastructure are getting international recognition is equally remarkable. At the IBC meeting, the most important CEO forum in Davos, the country is front and center, making a lot of noise in the debates.


When it comes to the telecom business, what are your thoughts on its current structure? It is believed that a duopoly will soon form. What are the odds of Vodafone Idea (Vi) making it?

The answer is elusive...It is imperative that India has one public sector player and three private sector players, as I have already stated. But we're active in a number of nations across the world, particularly in Africa (where the number of operators has dropped to a minimum of two). Europe has not yet achieved its goal of descending to that level. In countries like India, where there are a lot of operators, problems like spectrum and infrastructure fragmentation, fiber duplication, and overutilization of tower resources arise. The number of operators in Sri Lanka has decreased from six to four. It is possible that two operators would be sufficient for such a small population.


Even though three private companies and one public sector entity would be perfect for India, the reality could be more like two private companies and one public sector entity as BSNL has recently installed a 4G network and is already planning for 5G to launch soon. Thus, the trifecta of service providers will continue to exist in India. I think we can all agree that four is the magic number.

The government has publicly backed Vi, turning a substantial amount of its funds into shares. Even though the government has a stake of 33.1% in Vi and hopes it stays healthy, the decision-making power rests with the company's sponsors.


A lot of market share has been lost by Vi, and the company is slipping behind. Unfortunately, they are extinct in a lot of areas across the nation.


What do you anticipate the market structure to be like when the (regulatory) payment moratorium expires in FY26 and spectrum payments are due?

The answer is conditional. Assuming someone is able to come up with the money for Vi...There's a business with more than 200 million clients at the end of the day. Because it is a challenging business with low return on capital despite high valuations and stock prices, it would be great if someone could come up with the capital and the financial wherewithal to weather the negative cash flows for a few years. The fundamental return on capital is what you need to look at...An investor who plans to pour significant funds into Vi must exercise patience. To close the existing gap, which is around $7-9 billion, and then some patience is required. (Regarding the structure of the market,) I'll let you guess.


How do you feel about Vi's large Indus dues? Is it delicate to bring up because pursuing recovery would put the company in jeopardy?

As Airtel, we are unable to advocate for it. We sit on the board of directors and are shareholders in Indus. It is unfair that one client is paying while another (Vi) is not, and that one is gaining an advantage in the market. We keep hammering the table to emphasize that others must pay. The sum of dues is quite substantial. This is money that Vodafone CEOs had previously assured us would be paid. More than 2.5 years have passed with three agreements inked but never fulfilled. It's a major problem, and minority shareholders on the Indus board have written to us to demand answers as to why we have been so careless in collecting these payments. Payment must be made or made arrangements to be made for this amount. It is imperative that Indus recovers the funds; nevertheless, we do not wish to encourage them to take extreme measures against Vi. A public firm is what it is. The board of directors and independent directors of Indus have a responsibility to their shareholders to get this money back. Thankfully, the dues are no longer increasing, but they are still working on it. Due to Indus, Vi is currently paying its bills.


Revenue market share (RMS) for Airtel has reached an all-time high of 37.5%. What is assisting you in reaching these targets?

We have an even larger underlying market share. During the past several quarters, we have achieved a return on tangible assets gain of 7-8%. Since the market has not expanded significantly over the past two to three years, that profit is mostly due to the losses of other operators. The reason behind this is the excellent execution, the introduction of 4G in areas where we were previously unavailable, the greater quality of our network and customer service, and most importantly, the strong and appealing Airtel brand. It makes us delighted to know that the company has come a long way from where it was 5 or 6 years ago.


Are additional tariff increases in the cards?

It was perhaps six or seven years ago that I stated ₹300 as the optimal ARPU. It took me by surprise how long it would take to reach 200 rupees. However, I can assure you that a robust and vibrant telecom ecosystem is in everyone's best interest, including customers, if India is to be supported by two or three telecom businesses. In other words, businesses need a healthy budget to construct new networks. Without any income to show for it, 5G has been a tremendous burden on telecoms. In the past 18 months, Airtel has invested about $10 billion, or ₹80,000 crore, on 5G spectrum and network. Based on my assumptions, (Reliance) Jio has invested around $25 billion in spectrum and networks, which is twice our level of investment, but has yet to see a return on that money. This obviously won't work forever. The nation's digital dream will benefit from reaching an ARPU between ₹250 and ₹300 as soon as possible, in my opinion. Everything from the DBT and government services to the whole financial sector depends on these communication networks. Strong telecommunications networks are the backbone of the digital public infrastructure (DPI). There needs to be collaboration between the telecom department, Trai, stakeholders, and investors. The consumer should be aware that "I've got to pay a few rupees extra to get a very high quality service, at by far the lowest tariff anywhere in the world."


Is the cost of communication in India lower than in Africa?

Actually, our prices are lower than those in Africa. It works out to about 10 rupees each day if the monthly payment is 300 rupees. Now even for a common man, that’s okay — if he’s consuming 2GB of data a day, doing his business, his personal stuff, watching videos.


More and more, people are relying on digital and financial services. How well did Airtel do in those domains?

I believe we have excelled, particularly in the areas of cloud computing, security, and communication platform as a service, which caters to large-scale enterprises. When it comes to music, we could have been more successful—but then again, practically nobody has. However, Indians would rather have their songs played for free than pay for it. Thus, Apple has zero, Spotify has a little percentage, and Amazon Prime has a minor percentage. There are a lot of clients, but none of them pay, Wynk. Similar to JioSaavn, which has also failed to generate revenue. As a result, niche businesses like YouTube are thriving. Ads make up the majority of YouTube's earnings, and the app is likely the most downloaded music player in the nation. In contrast, our business operates on a subscription basis.

Airtel is only one of many in the telecom business that has dabbled in advertising. In my opinion, though, we have failed. But in the realm of finance, for example with Airtel Payments Bank or Airtel Financial Services, that is gaining significant traction. Financial inclusion is what we're doing. We have 16 million rural consumers that use DBT to make deposits and payments.


Is the financial services operation of Airtel something you're considering listing?

The Reserve Bank of India has mandated that you do it every so many years. We'll have to test that to find out. However, we will be compelled to do this in the end.


At the next spectrum auction, will there be a lot of competitive bidding?

It seems like BSNL, the two major operators (Jio and Airtel), and the spectrum are pretty much at capacity. After the merger, even Vi has an excess of spectrum in some areas. Thus, for us, it will be a rejuvenation spectrum consisting of small bits. To be honest, I don't see it as a major moneymaker for the government coffers.


Will 5G arrive in India too soon?

We must do it despite the fact that it is too early on a global scale. One positive aspect is the significant increase in capacity compared to 4G. With this capacity buffer, Jio and we are both prepared to handle the next wave of data consumption. It's a ways off, but the rest of the world has progressed, and India must, too. India takes great pride in being the world's fastest 5G rollout nation.


With the arrival of AI and IoT apps, would carriers increase 5G prices?

Enterprises will have access to specialist applications like autonomous driving, robotic surgery, drone management, etc., but these won't be related to ARPUs. Their focus will shift to finding solutions. We simply require data rates to increase; I do not believe we will (soon) have a separate pricing structure for 5G.


Is there a sudden and significant increase in data consumption?

With the advent of 5G, data consumption skyrockets. Comparable to a hose. People adapt (and drink more) to quicker water flows.


Wouldn't that have the ability to drive ARPU?

Prices will need to rise across the board, including for that. We have made every effort to tackle it, but we just cannot do it all by ourselves.


But your leeway might increase if competition is low, wouldn't you agree?

The level of competition is currently at an all-time low. There are fewer than twelve operators, unlike before.


Therefore, it is not true that you are all free to increase prices. Do you know why that is?

Okay, here are two things. First, there is a cap on the premium amount that we can have. That means Jio, the rival, will have to do something they haven't done in a while: hike pricing. As a second step, you need to assess the market to determine its budget and the purchasing power of its various segments. And then there are those consumers who are consuming data at an excessive rate. It is unacceptable. Then, if you raise prices slightly, you may control such consumption, which in turn reduces network load and improves spectrum utilisation. However, our consumers in India should be pleased to hear that we are able to provide inexpensive tariffs due to our size. Instead of ₹200 per month, the price would have been ₹2,000 in any other location with a smaller population and lower consumption.


At Bharti, how is the succession plan formulated?

No need to even wonder about it; the corporation is headed by (Airtel MD) Gopal Vittal, and he will be succeeded by someone else in due course. The simple part is deciding who will replace me as a shareholder. There is a sufficient pool of qualified individuals to manage the business.


However, will a member of the Bharti family step forward to take the lead?

As a board member of Airtel Africa, my son Shravin Mittal is responsible for the continent of Africa. On the Eutelsat OneWeb board, he serves as a lead member. His own tech fund is also managed by him. Sunil Mittal's other son, Kavin, is in charge of his technology company. Bharti, on the other hand, is more like to a modern, meritocratic public corporation in the West. My kids have great training and degrees. When the time comes, I will be more than happy to include them when they volunteer. Still, I feel like I have the stamina to keep going.

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