King of the rings - Sunil Mittal

Mittal believes in scaling up to gain the edge

Sunil Mittal remembers driving past the IIT on his way to his office at Nehru Place in New Delhi when he received the SMS. “I think it was one of the first text messages that I received. It read: we have crossed 10,000.” That was December 1995 and it had taken Airtel nearly two months to notch the fivefigure mark.

Today, Airtel adds 10,000 in the time it takes him to drive from his home to his office off Vasant Kunj in Delhi. Indeed, in an eight-hour working day Airtel adds just over 1,00,000 subscribers to touch three million a month. Last Wednesday, when Mittal left his office his mobile blinked a message “99,900,000”. As he left the office on Thursday, Bharti Airtel became the first Indian company to notch 100-million subscribers.

Yes, the velocity of growth in the Indian mobile market has helped Airtel reach the landmark. After all, India added over 15 million in March alone and that gives an idea of the momentum. But the scale of the achievement couldn’t have been without the relentless focus on acquisition of mass or market share. The ruling mantra at Airtel from September 1995 has been: Refine your systems and processes. Strive to get market share and build the brand.

The desired result: market domination. With a market share of 24 per cent, every fourth mobile user in the country is an Airtel consumer and at 100 million subscribers Airtel is around 27 million ahead of its nearest rival. So even if Mittal froze growth and new subscriptions, the next player will take over nine months at current rates of growth to reach 100 million. This, in a market which includes multinationals like Vodafone (earlier Hutch), the Tatas, a Birla, an Ambani and India’s largest corporate baron—the government of India.

The big numbers Rs 36,962 cr: Revenue earned in 2008-09 24 per cent: Bharti Airtel’s share of total wireless telephone market 32.4 mn: Number of subscribers added between April 2008 and March 2009

The achievement has been built on the back of stupefying scale. With 67,513 towers Airtel’s network offers connectivity to 81 per cent of the population, rather it reaches out to people in 5,060 census towns and 4,15,000 smaller towns and villages.

With 1.2 million dealers, Bharti Airtel could well be among the biggest retail players. In fact, if one took the Census statistics, Airtel has two outlets in every location for subscribers to transact business at.

And, of course, there is the online presence. If only they revealed their daily collections from pre-paid cards and recharges, daily cash transactions could place Airtel among banks. Indeed, consolidated daily earnings of Airtel are to the tune of $10 million. Significantly, in a market where average revenue per user (ARPU) is notoriously low —as low as Rs 200 for some—Airtel has an ARPU of Rs 305. Indeed, while it has one of every four connections issued in India, it earns one in every three rupees spent on mobile telephony.

Did he foresee touching the ninedigit number? No, says Mittal, candidly. After all it took nearly six years to touch the one-million subscribers mark. “It was only when we touched the 25-million mark that we realised that we could begin thinking about it. In fact, internally we had in 2006 estimated that we would probably touch 100-million subscribers sometime in 2010.” At a management level the challenge was to arrange for money, manpower and manage partnerships. Raising capital, forging partnerships with a variety of players from Singapore Telecom to IBM and building a team from the best brands including Xerox, Levers, Coke, BT and Deutsche Telecom, Mittal created a hyper platform for growth.

Telecom projects are typically cash guzzlers in the first years. In 2002 while other players hesitated, wondered about the state of the capital market he innovated by pricing his share at Rs 45 through a book-building process and raised Rs 834 crore. At other times Mittal managed to lure and snare a range of cash cows from private equity players like Warburg Pincus to funds to investors like SingTel. He outsourced when required, created divisions when needed and invested in value-added services like few did. Not many would know that Airtel would be the largest music distributor in the country. Asim Ghosh, former managing director of Vodafone Essar believes “Mittal is an intense and terrific competitor because he has the ability to make decisive moves at defining moments”.

Success required more than just management and team work. A new business in a new sector, where the policy landscape was pockmarked, needed political navigation skills. When the players were bent under the original licence fee system, Mittal along with other players lobbied for a revenue sharing regime. When funding was critical and other players were tentative Mittal made it a one-point agenda and got the UPA to push for higher FDI—74 per cent—in telecom. Mittal proved to be so adept at managing political minds on both sides of the spectrum that for some time many— himself included—wondered if political entrepreneurship was the next stop. Is it still an option? Mittal waves the question away with a smile and a gentle “it’s all frozen now”.

Of course, times are inopportune for a career switch. The telecom market is getting competitive, with more players coming in. Almost every analyst’s report following the Q4 results has placed the sector on watch and predicted that it is likely to underperform. Mittal agrees there will be pressure and tariffs may come down. But he also believes that when all else is equal “the differentiator will be quality which can be offered only when you have scale”. Also, unlike existing players who have it all in place, the new entrants have to invest to expand and hope to earn.

For now, though, the Airtel team is focussed on the next revolution, 3GHSPA. Even as the Government was dilly-dallying about terms and timing of the 3G auction, Mittal’s team has done the full dress rehearsal. “We can press the buttons tomorrow and in 180 days we will be operational,” he says with a confident grin. Once again the objective is market domination.

Contrary to conventional wisdom he believes cost will not be an inhibitor and 3G will move and grow the market. Tariffs, he points out, are around $50 a month abroad and could be as low as $20 in India. 3G HSPA is essentially data flying on jet fuel. From video downloads to live TV and online gaming, 3G services will offer mobile broadband and transform the market. With investments in value-added services Airtel is already among the top players and earns nearly 10 per cent of its revenues in value-added services.

For Mittal, though, the excitement is not so much in videos, music or m-news. “I see the potential of total transformation from health to education to social services if one can use 3G services to deliver governance.” Even as his team and the others celebrate the achievement, Mittal is working on his next dream. Aligning 3G with e-G, or e-governance.