In Business There Are No Foes, Only Friends
Q & A
What does MTN mean to you and Bharti?
It is a well thought out deal and has been in the works in some sense for a long time. Bharti typically tries to prepare itself a couple of years in advance. If you remember, we were the first to get into long distance telephony and we had India’s first submarine cable. When we built our fibre network, people asked why are you putting tens of thousands of crore into it? Apparently, mobile companies didn’t need to do that. But we persisted and at times at great risk to the enterprise.
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Image: Dinesh Krishnan
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"We have revenues of Rs. 100 crore or so a day and spend Rs. 102 crore or so. Not a paisa comes to us for approval" | |
Without taking any names, let me say this: Some companies thought it was a foolish strategy and did not do it. They get it now. But we have a 35 percent stake in a market where there are many players. But now, India is done. Of course, there is still some growth left. I am not saying it’s all over. All I’m saying is our job in the corporate office is done. Our networks cover 82 percent of the population. We’ll get to 90 percent.
So, where does this company go to from here? What is this team going to do in the next three-four years? They’re getting restless. We need to expand our horizons and go out of India. That is what we have been trying over the last couple of years. On a large scale, it is tough to go and pick up new licences in markets like the CIS and Europe. The US makes no sense now. Taking over existing operators involves billions of dollars. Then there is our business model. With one of the lowest tariffs in the world, we have an EBIDTA of 40 percent. In our view, this model can work only in developing markets — not developed ones. The focus has to be on Africa, the Middle East, and some other developing markets. Given that, there are very few pieces to partner with. I can only think of Zain, MTN, Fast Telecom and Vivendi.
Within these, MTN is a fine example. Its revenues are bigger than ours; they’re present in 21 countries and have over 100 million customers. We have been toying with the idea for quite some time to get into an alliance. Now, the term sheet has been signed. If we put these two companies together, we have the third largest telecom company in the world. In this business, I have learnt scale is everything. That’s what we are looking for. But I must add it’s not done until it’s done. There are many moving parts.
What went wrong the last time?
Anil [Ambani] came in with a higher bid. While such talks are on, it is quite natural for somebody to come in with a higher bid.
But backing out mid-way through a deal like that…
World over, interlopers in any process are the norm. If you have an Alcoa, somebody will jump into it. If you’re close to getting Arcelor, somebody will jump in. You need to deal with it. We decided to walk away from it.
There is a school of thought which believes MTN has now come to the table in a weaker position.
No. The whole world has weakened. We are weaker, they are weaker. And at the management level over the last one year, we have had very warm relationships. Bharti’s philosophy is that in business there are no foes, only friends. We have lived in partnerships. We got Vodafone into the country. When they wanted to go out and buy Hutch, we could have blocked it. One call from Arun Sarin [then the CEO at Vodafone] and that was it. We said go ahead. We are made very differently.
What similarities do you see between MTN and Bharti?
We operate in two different markets. I don’t understand Africa or the Middle East as well as they do. But I understand telecom. So I can add value to the business. The outsourcing model we developed at Bharti, it can be deployed into MTN’s markets where they’re already doing well. So, we bring a strong performance orientation to the table. MTN understands the Street very well and are super with governance, processes and systems. That will compel us to change our game as well.
Eventually, this will not be one team sitting out of India managing Africa or the other way around. Each will manage their respective geographies. MTN has a strong leadership team in every country they operate in like we have leaders managing each state in the country. I don’t think there should be any concern about clashes. Whatever will be done will be at the board level.
Bharti is not a typical promoter-led company. The whole idea of dominance or empire-building happens typically in promoter-led companies. In our minds, we are very clear this is a professional outfit. It just happens that we founded it and hold a large number of shares.
Doesn’t MTN have a more empowered management team? Airtel has a promoter at the helm...
But that doesn’t make our team any less empowered. We have revenues of Rs. 100 crore or so a day and spend Rs. 102 crore or so. Not a paisa comes to us for approval.
After the deal goes through, what will the organisation look like?
In the proposed structure, both companies will remain separate, but with cross-holdings. MTN will have people on our board and vice versa. Eventually, if we go in for a merger, then the structure will change.
When you looked around the world, what models of merger did you consider?
Typically, I like to create a model with huge cross holdings and harness the synergies of both organisations. But we are looking at a merged entity over a period of time. I think it will be easy for us because we have worked with partners in the past–British Telecom, Telecom Italia, AT&T, Singtel.
What about MTN? What kind of experience does it have with partners?
They have done Investcom, a huge entity controlled by the Mikati family [based out of Lebanon, they own 10 percent in MTN and is the company’s second largest shareholder after the South African state pension fund]. And they have integrated very well. Mikati Azmi sits on the board, has a say and is deeply involved with the company.
Coming to India, you seem to have upped the ante. You’re working on building a strong bench. Why?
Five years from now, the telecom business in this country will be a very different one. For instance, we have different networks for mobile, long distance, fixed line. Eventually, it will have to be one network. Jai Menon [CTO at Airtel] is driving that change. We also have to make the transition from playing the customer acquisition game to the value game. We are this huge acquisition machine that gets customers, bills them, things like that. The industry has to now move towards managing customers, enable commerce for them and provide entertainment.
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