FEATURES/Richest Indians in 2012 | Nov 23, 2012 | 22014 views

Sunil Mittal: Time is Running Out For Him

Sunil Mittal single-handedly built Indian telecom. Now he must save it, starting with Bharti Airtel
Sunil Mittal: Time is Running Out For Him
Image: Getty Images
Sunil Mittal, Chairman & managing director, Bharti Enterprises

Name: Sunil Mittal
Profile: Chairman & managing director, Bharti Enterprises
Rank in the Rich List:   12
Net Worth:  $5.9 billion
The Big Hairy Challenge Faced in the Last One Year Bereft of management attention, attempts to diversify seem to have failed. Even in telecom, Airtel’s business model is now a commodity and its leading incumbent status, a liability. Meanwhile, in Africa, there is still no silver lining.

The Way Forward
From being a beneficiary of regulation, Mittal has turned into an adversary. The last few years have seen him adopting a martyr complex too often, something you don’t from a market leader. Can he fix his Achilles’ Heel—the lack of a pragmatic and forward-looking regulatory strategy? Along with this, he will also need to transition Bharti Airtel from the commoditised and diminishing voice telephony market, to data services.

The year was 2005 and Sunil Bharti Mittal, then 48, founder, chairman and group CEO of Bharti Enterprises was the undisputed king of the Indian telecom jungle.

“Between 2000 and 2005, the formative period of this sector, his perspective was superior. What seemed like recklessness to others was an opportunity to him. When the sector was shell-shocked, he took the first-mover advantage. He put out investments and resources by diluting equity to raise money when most operators were looking inwards. He saw with greater clarity what others didn’t,” says Sanjeev Aga, former MD of Idea Cellular.

Mittal had single-handedly invented the outsourced ‘minutes factory’ business model that allowed low-cost mobile telephony to flourish in India. “There is no doubt he came up with a great business model by telling his partners, ‘I will produce the minutes; you supply me with the machines for doing that; but I’ll only pay you if I sell the minutes,’” says BK Syngal, principal with Dua Consulting, and a four-decade veteran of Indian telecom.

It was from that position of unassailability that in May 2005 Mittal had rhetorically answered Ratan Tata, chairman of the Tata Group, who had voluntarily offered to pay Rs 1,500 crore for third generation (3G) mobile spectrum across all of India. “There is the Prime Minister’s Relief Fund... If someone wants to donate money, he can do it there,” Mittal had told the media.

Back then, many were surprised that a person as sharp and astute as Mittal could make a statement as callous.

Seven years of hindsight later, Mittal’s statement still comes across as a stunningly short-sighted misstep from a person known for his long-term vision.

Because in December 2007, Bharti Airtel would go on to offer Rs 2,650 crore—nearly 80 percent more than what Tata had—for pan-India 2G spectrum. That price has, in 2012, risen to Rs 14,000 crore at the minimum—the reserve price set by the government for the upcoming auction of spectrum.

Meanwhile, Airtel’s business model has by now been replicated ad infinitum by the competition, to the extent that it is now merely table stakes in the Indian mobile telephony market. Two of Airtel’s biggest competitors, Vodafone and Idea, have not just closed the gap with it but have even been beating it quarter after quarter in many circles.

Idea, once a relative minnow to Airtel, has nearly doubled its market share from 9.5 percent to 17 percent during the last four years, even as Airtel’s has fallen from 24.3 percent to 20.7 percent.

“A lot of the competition has come up in the last two to three years, and obviously the No. 1 player has taken the hit,” says Sachin Gupta, head of Asian Telecoms Research at Nomura.

The last four years have also seen Airtel buffeted by a series of challenging scenarios, including hyper-competition and malicious regulation, and commoditisation of voice telephony that has progressively cost it profit margins and market share.

“The industry has become largely a plain vanilla operation centred around volumes and prices, involving very little innovation,” says Mahesh Uppal, director of consulting firm, Com First and a veteran telecom policy expert.

Remaking the Factory
In the last 10 years, Sunil Mittal gave the global telecoms industry two game-changing ideas—the outsourced operating model, and the ‘minutes factory’ model.  But with great success comes great expectations. The world now expects him to come up with a new game changing idea, perhaps something that can democratise data services for tens of millions of customers across Asia and Africa.

Ironically the biggest impediment to that at Airtel is its own success. Managers who have grown through its ranks have mostly seen 20 to 30 percent growth year after year, and vendors falling over each other to deliver innovation. Very few have a firsthand perspective on handling a recession; even fewer have any international experience that can be applied in India.

And then there is the politics. “It is an incestuous world of politics within Bharti. There are silos between managers’ turfs everywhere as a result of which innovation gets stifled. Within vendors, very few people want to work on their account,” says a senior executive with IBM, Bharti Airtel’s biggest outsourcing partner, who did not want to be identified.

Years of working under an ‘everything-is-outsourced’ construct has managers waiting for their vendor partners to deliver disruptive innovation instead of leading from the front themselves.

To counter that, Mittal put Airtel through a nearly two-year-long restructuring, letting go of hundreds of people, including board-level executives like Atul Bindal who was regarded as one of its sharpest executives by people within the industry. The results are still a way off, judging from either the dropped calls or absence of any meaningful data strategy. At least three consultants who have worked with Airtel say the only way it can bring about disruptive innovation is to bring in talent from outside.

Mittal, always a hands-on entrepreneur, has, as a result, become even more operationally involved with Airtel. Besides being part of circle-level reviews, he is also learnt to be conducting fairly granular reviews with various Airtel executives every few months.

The Bharti Group, through their spokesperson Raza Khan, declined to participate in this story or to provide responses to a detailed set of questions sent by Forbes India.

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Comments (2)
Varsha Jadhav Oct 9, 2014
you are excellent businessman.
Smita Sep 5, 2013
Overall a good summation. However, Sunil Mittal picked many people's brains on the way to reaching his pinnacle and dropped those people on the wayside...also he took credit for ideas that did not belong to him ...also made money on others people's ideas without rewarding them
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