Last year in April, when William "Bill" Owens took over as Vice Chairman and CEO of Nortel Networks, things were looking far from happy for the Canadian telecommunications equipment manufacturer. Former CEO Frank Dunn and nine other executives, including the CFO and the company controller, had just been fired over an accounting scandal that brought class-action lawsuits and required the company to restate its financials for 2000 through 2003. One year into the job, Owens, once the second-highest ranked military official in the us, has moved simultaneously on several fronts, cleaning up Nortel's accounts, roping in new talent, allaying customer fears, even making acquisitions in April this year. Recently in India, Owens, who's also on the boards of DaimlerChrysler and Carnegie Foundation, among others, spoke to BT's R. Sridharan on Nortel's recent troubles, and how India, where Nortel has invested $10 million (Rs 44 crore) in Bangalore-based Sasken Communication, fits into its global strategy. Excerpts:

This is your first visit to India as the CEO of Nortel. What do you think of the telecom market?

It really is a revolution in a lot of ways. If you see the growth side, it's so exciting. It's exciting not just for the growth, but also for what it does for the people of India. In a lot of ways, this has been interesting because India decided to grow somewhat gradually, and waited until a couple of years ago to really go full forward into the telecom marketplace. It was a wonderful time to do it because the products were mature, the capability and data over mobile phones were greater, the cost of the GSM handset was much lower, and the market was ripe for mass distribution of low-cost mobile telephony. So, India is one of the most important countries in the world for Nortel. Not because the early profits are going to be so great, but because it's just a good place to be in to partner with some of the large telecom companies, BSNL, Reliance, Tata, Bharti... you want to be present as a part of the Indian workforce, which I think everybody around the world realises more and more is very high quality. By being here, we become much more involved with that workforce, and you find ways to take advantage of that workforce and skill level not only in India but in other countries as well. For example, as a result of the BSNL project, we have found a number of Indian partners who give us a great advantage when we go to deploy a network in another country.

But isn't Nortel late to the Indian telecom party? It wasn't until late last year that Nortel bagged its first big order from an Indian carrier (a $500-million or Rs 2,250-crore contract from BSNL).

While we are a little later than some of the other players, I can't tell you exactly why. I've been chief executive at Nortel for one year. What I can tell you is that the movement here was a strategic move for us. The BSNL bid was a strategic bid... it was meant to get us here, have us develop partnerships, find new low-cost structures, use the Indian capability, etc. Yeah, we are later than others, but we are here as a strong power.

Some analysts say that the BSNL deal is going to cost Nortel $200 million (Rs 880 crore) in lost profits. Is that the price you are paying to get your foot in the door here?

That was a very competitive bid. We have learned a lot, and we did pay to get into the marketplace here, and how exactly the profit line will play out is something we just have to wait for, because there are many elements to how it plays out. Obviously, it's in the best interest of not only Nortel but also our partners if we make some money on these projects, else we won't be here for the long term. So Nortel expects to do that. We expect to compete handsomely with respect to further expansions of the build out, perhaps selling enterprise products over the networks. Remember that Nortel is one of only a couple of companies in the world that do both enterprise business and telecom equipment business. So we would expect that whether it is e-governance, or small and medium business, or large business enterprise services over these networks, there would be substantial opportunities for us there. Additionally, we have some of the best technology in the world. We spend more money on R&D than our competitors do. So there are a lot of opportunities for us to use our presence here to grow our revenue and profits. But it is also back to the earlier point, which is, being here and taking advantage of the Indian workforce allow us then to go to other places and make money in other places as well. So it has strategic dimensions to it.

I doubt that any firm in the world can come down to the price level of a Chinese competitor that is government subsidised

Are the Chinese telecoms equipment manufacturers like Huawei and ZTE forcing you to drop prices? Nortel has never been a price warrior...

Huawei, ZTE and utstarcom are fierce competitors. One would have to look at their overall business success in the long run to judge whether this is in their best interest. There are some advantages that Huawei and ZTE have over companies like Nortel. Nortel is required to and does account for every element of the balance sheet. That's why we spent $200 million (Rs 900 crore) last year to get our balance sheet accurate and complete, to meet all the criteria of sox (Sarbanes-Oxley) 404. One would want to ask Mr Ren (Zhengfei, CEO) at Huawei, or the CEO of ZTE or utstarcom if they've done the same kind of accounting. They can then compete, therefore, in ways that a Nortel cannot. But quality is the name of the game for Nortel. We have prided ourselves on our reliable telecom networks, secure networks; this is especially true as you get into IP packetised networks where... you know, all these wireless networks will go in that direction, whether it is CDMA or GSM. They will all become eventually packetised. When that happens, the ability of a virus or an intruder to come into those networks and have dramatic effects on a nation-wide basis is great. How do you provide security and reliability in that environment? We spend a lot of R&D money thinking about those things. That I think is really the edge.

If Nortel is going to focus on the Asian markets, how can it come down to a cost structure that allows it to sell equipment at prices that are locally competitive?

I doubt that any company in the world can come down to the price level of a Chinese competitor that is government subsidised. Further-more, you don't see a Sarbanes-Oxley overview of the Chinese competitors, so one doesn't know how much they are, or not, making.

Talking of Nortel as a company, even for a seasoned soldier like you, the last one year must have been difficult. So what kind of a to-do list did you walk in with and how much of it have you achieved by now?

Well, I had a large list and we have done a number of different things. Establishing financial credibility, transparency and accountability was of the greatest importance. With the release of our first quarter 2005 numbers at the end of this month, when we return to normal financial reporting, Nortel has achieved that. We've spent a couple of hundred million dollars on accounting, and we have done a number of things to absolutely ensure ethical, transparent financial reporting. And I believe that this is a journey that will never end in terms of financial accountability. We needed to start the pathway to profitability and cost reduction. We needed to start down the pathway to reduce our OPEX (operating expenditure) and we are well on our way there. As you may know, I announced a reduction of 3,250 people and that would be complete by the end of the second quarter. We will continue that assault on OPEX. We announced that we were deeply interested in government solutions and security solutions when I came on board in April 2004, and you have probably observed the acquisition of a wonderful company called PEC in Washington D.C., which is purely oriented to top-end government solutions, homeland security... the kind of application that may be relevant in other places in the world, certainly in this country.

The more you get involved with India, the more you build partners. It's more likely that you do more R&D here

In Q4 of last year, Nortel became profitable sequentially, but a lot of your profits came from extraordinary income. How much of your Q1 profits would come from continuing businesses?

We can't afford to not make profits on our businesses. Nortel should have a good 2005, but I have not given any projections.

Did the accounting issues at Nortel affect customer relations? Recently, you lost the Cingular deal and also the BT Group deal...

I don't believe the loss at Cingular or BT was associated with the financials of Nortel. We had a couple of products that were delayed as it relates to BT. It would be hard to say that management has not been distracted in 2004, with shift of half of the management team, and change in the board of directors. I have been out and around the world to talk to essentially all of our major telecom customers. I've spent a lot of time on the road to give them the reassurance of our complete commitment to credibility. This is not the old Nortel. This is a very different company. This is a company that is much more strategically oriented, a company unquestionably sound financially, a company that is built with integrity and ethics. And I think our customers believe that.

Indian telcos are going to be spending some $16 billion (Rs 70,400 crore) over the next two years. How much of that does Nortel hope to bag?

I think it would be wrong to say all of it. Nortel will compete strongly and build the best possible relationships.

Is there an India strategy that you have put in place?

Sure.

Do you want to outline that as safely as possible?

(Laughs) No, but it has to do with substantial growth. Not just for the growth here but, like I mentioned to you earlier, the more you get involved with India, the more you build partners. It's more likely that you do more R&D here, more software work here, and find partners who do manufacturing of very high quality at low cost. I don't think there is any other country in the world today that has all of these parameters.

Why do good companies go bad?

Nortel has always been a very ethical company. And what happened at Nortel was due to a small number of senior executives. You must realise that businesses have become much more complex. And accounting has become very, very challenging. But we have spent the last year getting that in order. All that's behind us now.

A final question. Is being a CEO tougher than being a soldier?

I don't think so. They are two different worlds. I've been in a couple of wars, and that hasn't been easy either. It (being a soldier) is full immersion, full dedication, full allegiance to your people and your organisation. It has a lot of the same features as being the chief executive of a company like Nortel.