f o r    m a n a g i n g    t o m o r r o w
APRIL 8, 2007
 Cover Story
 BT Special
 Back of the Book

Mobile Security
Today, it is all about information and how the right information is sent to the right people at the right time and right place. Uncertainty about how to secure mobile phones in the face of increasing threats is slowing individual adoption of mobile applications. There are many facets of mobile security, including network intrusion, mobile viruses, spam and mobile phishing. Analysts expect big telecom companies to develop security solutions on various security platforms.

Rough Ride
These are competitive times for the Indian aviation industry. As salaries zoom, players are scrambling to find profits. Even the state-owned Indian is now seeking young airhostesses to take on the competition. It is planning to introduce a voluntary retirement scheme for airhostesses above 40 years. On an average, they draw a salary of Rs 5 lakh a year. The salaries of pilots, too, are soaring. According to industry estimates, the country needs over 3,000 pilots over the next five years.
More Net Specials

Business Today,  March 25, 2007

Airtel's Big Test
Starting now, India's top telecom company will have to figure out two things: First, how to keep friend-turned-foe Vodafone from wresting the #1 slot from it. Second, how to do so without Sunil Bharti Mittal at its helm.
"People have understood that it is not an ARPU game, it is a volume business"
Manoj Kohli
President & CEO Designate/Airtel
When Sunil Bharti Mittal gets some time, he watches TV. Just like you and me? Well, not exactly. He actually tries out Airtel's pilot project for internet protocol television (IPTV) that his company has been quietly testing out in a few select neighbourhoods outside Delhi. "I'm still far from happy with it," he says-an indication that the team at Bharti Airtel will need to improve on it before they get the boss's approval for a commercial launch of the IPTV service.

That kind of involvement is natural to expect from someone who's built his Rs 18,000-crore telecom business from the ground up in 12 years flat. Airtel boasts a subscriber base of 35 million, accounting for a market share of 22 per cent. By 2010, Mittal expects a subscriber base of over 100 million. The market values Airtel at Rs 1,42,000 crore and last year, Forbes ranked him as the sixth richest Indian with an estimated net worth of $6.9 billion.

Personally trying out his company's fledgeling IPTV service comes naturally to Mittal who's known to routinely travel to remote areas around India to boost the morale of his sales troops as well as to experience first-hand how good or poor his company's telecom services are, mainly in semi-urban and rural India. When Business Today met him for this feature, Mittal had just got back from a little village, Goriyya, 10 km outside Chindwara in Madhya Pradesh. "The (Airtel) signal there was very weak," he says, "and that's not acceptable; we have to put a tower up somewhere there."

That's how hands-on Mittal is in running his business. Yet, this April, Mittal will be handing over charge to a hand-picked professional manager, Manoj Kohli, 48, who's currently President at Airtel, but will then assume the role of CEO. Also in April, Mittal takes over as president of India's leading industry lobby, Confederation of Indian Industry (CII) for a year. In that time, he intends to test how his organisation fares without him. "Some entrepreneurs run their company hands-on for a long time; others go to the grave running their companies; but I was always very clear that this is not something I wanted to do," says Mittal, who will continue to oversee governance issues and review the business as Chairman and Managing Director.

Future Challenges

"We are on the verge of rolling out a massive new fibre network across the country"
Atul Bindal
Joint President, Broadband & Telephone Services/Airtel
Kohli will be helped by a team of 12 managers, the Airtel Management Board (AMB) that comprises executives from across the globe-from Canada, the UK, Australia, the us as well as old timers from Airtel like Sarvjit Dhillon, Director Finance. Mittal proudly says the AMB "is the best management team in the country, not just in telecom but across Indian industry".

But that team has an agenda that is chockfull right now. Mittal's decision to step down comes at a time when Airtel is faced with a number of challenges. Its erstwhile ally, UK's Vodafone has just acquired its arch-rival Hutch-Essar. And although Hutch is a distant fourth in Indian telecom's pecking order, Vodafone CEO Arun Sarin has publicly stated that his objective is to capture the #1 spot in the Indian market "within the next five years".

Then, although India is now the fastest growing market for mobile telephony adding six million subscribers every month, Indian telecom rates are the lowest in the world. Besides, average revenue per user (ARPU) is low compared with other markets. Both these factors make it tough for Indian telcos to maintain margins and healthy bottom-lines. Indian operators, notably Airtel, have thus far been able to generate high profits, partly because of high volumes but also by keeping costs under check. "People have understood that this is not an ARPU game, it is a volume business in India; it is how efficiently I use my network," says Manoj Kohli.

Thus far, the growth of new subscribers has been impressive for Airtel. In the 12 months to December 2006, Airtel's mobile subscribers grew from 16.3 million to 32 million or by 95.8 per cent, in keeping with the general trend in the market: Reliance Communications, the #2 wireless operator (which uses the less common CDMA technology versus Airtel's GSM) grew 101 per cent during that period, while Hutch-Essar grew 75 per cent. Still, in order to combat falling ARPUs in the wireless segment, Bharti Airtel has to think of generating revenue from services other than voice. On the cards is a mobile electronic money transfer service, music downloads, gaming, movies, cricket and, of course, a big push to broadband services and a foray into direct-to-home television.

To stay ahead in a scenario where Vodafone is expected to ramp up operations, there are at least two things that Airtel is preparing to do. First, there are big investments being planned. Last fortnight, Chairman Mittal announced that the company would be spending nearly $8 billion (Rs 35,200 crore) over the next three years, mainly to enhance, upgrade and spread Airtel's mobile network-which currently stands at 40,000 cellular towers, to be capable of handling 125 million customers by 2010. And second, there are plans afoot to share networks with, well, Vodafone! In the works is a proposal that could see the two companies pool their infrastructure.

One Airtel

Brought in from British Telecom last year, Borghesi focusses on customer service
Carol Borghesi
Director, Customer Service Delivery/Airtel
Besides competition, the other big challenge for Kohli and his team is internal: to transform the multitude of circles and operations that the company has into one unified whole, dubbed One Airtel. Currently, Airtel operates mobile telecom services in 23 circles where it has a total of 35 million subscribers; it has, in addition, 2 million fixed line subscribers, over 1.5 million broadband subscribers and around 1,500 corporate users (under its enterprise services division). Till recently, these operated separately, with different it infrastructure, billing systems and networks. Now, they are all being consolidated. Jai Menon, Airtel's Director, it, explains it as: "One system for everything; one intranet; one it infrastructure; one network; one hub for innovation."

More crucially, Airtel is not resting on wireless alone. "We want to build five global-scale businesses: in wireless, in broadband, in enterprise solutions, in carrier access and in entertainment," says Kohli. While Airtel has only recently begun testing its entertainment offering, IPTV, Kohli promises that the company's upcoming Direct-To-Home satellite venture will be better than the competition.

Airtel's fixed line subscribers, too, are growing-from 1.2 million in the third quarter of 2005-06 to around 1.7 million in the third quarter of 2006-07. But fixed line margins are the least lucrative of all of Airtel's four current businesses. Last quarter, EBITDA margins for the business were 27 per cent-impressive, but low compared to the 37.6 per cent margins on the wireless business, 43 per cent on the carrier (long-distance) business and a massive 45.1 per cent on the enterprise business. Airtel wants to convert more of its fixed line users into broadband subscribers. Atul Bindal, Joint-President, Broadband and Telephone Services, says that the company is on the verge of rolling out a massive new fibre network across the country along with innovative marketing schemes in tandem with computer manufacturers.

Customer Focus

An HLL alumnus, Vittal's job now is to ensure Airtel stays the #1 brand
Gopal Vittal
Director, Marketing & Communications/Airtel
Back in 2004, Airtel created history when it decided to outsource its network management, a model that many have tried to emulate. Today, Ericsson and Nokia run Airtel's network, IBM runs its it infrastructure and even the company's call centre functions have been hived off. Yet, one of the challenges Airtel faces is in keeping its customers satisfied. The company added 3.5 million customers in January-February alone and servicing them is not an easy task. Last September, Airtel hired Carol Borghesi, formerly with British Telecom, as Director, Customer Service Delivery. And although Airtel's contact centre operations are outsourced, Borghesi is trying to institutionalise training processes, as well as the way the company deals with irate or confused customers.

Till 2004, Airtel had separate brands for post-paid mobile, prepaid mobile and fixed lines. Today, everything has been collapsed into one-Airtel, which straddles all services from pricey BlackBerry services at the top end to a lifetime prepaid connection priced at a mere Rs 99 per month. As Hemant Sachdev, Corporate Director, Marketing, Bharti Enterprises says, "I do not know of many other brands that have the amount of stretch that we have. From CEOs to peons, everyone uses the Airtel brand with ease."

When BT went to press an official announcement from Airtel was expected appointing Manoj Kohli as CEO-designate of the company, clearing the decks for Sunil Mittal's formal hand-over of the reins to a professional manager. And how will Mittal keep himself busy? Besides, the year-long stint at CII, that is? For one, he has a flurry of new businesses to nurture-retailing (through a tie-up with Wal-Mart), agri-products (in collaboration with the Rothschild family of Europe) and, perhaps a yet-to-be-announced foray into infrastructure. Still, most people who are familiar with Mittal's style of management-hands-on, passionate and driven-don't expect his influence to wane on the telecom business. Says Kohli: "Sunil is the spirit and vision of the company and even though he may not be around physically, this company bears his DNA. And anyway, he will always be a phone call away." So don't expect him to hang up any time soon.

"I am not unduly worried about Vodafone"

In a free-wheeling chat, Sunil Mittal talks about himself, telecoms, and Vodafone. Excerpts:

What does it mean when you say you'll retire at 50? You turn 50 this year, don't you?

Yes, in October. Well, you have to see this in perspective. First, I decided to get out of operations (at Bharti Airtel), which I did three or four years ago. Then the issue was of getting out of strategy, which is now being transferred to a professional management board. Review and governance issues will always remain here at the corporate office and I will continue to oversee those. In fact, sometime in April I will be going to CII (as President) and I assume in the next year I will be spending 100 days out of India. So, effectively I won't be around from April, so this will be a good test.

How will this transition be managed at Bharti?

The Airtel Management Board (AMB) is up and running. It's a great team. In fact, I would say that this is the best management team in the country, not just in telecom per se, but across industry: it has a wealth of experience and knowledge, pedigree and diversity.

How do you see the market after a player like Vodafone enters?

Hutch is a great competitor, very solid competitor. I don't see any difference in the intensity of the competitive scenario between US and them with Vodafone coming in. Vodafone is very good in two areas, innovation and handsets. But I have seen them for the last 15 months, so I am not unduly worried about them.

But post-Vodafone, if you look at the main challenges in the near-term, what would they be?

For Airtel, I think the challenge will be transition from an iconic leader to a professional management team. That is a challenge for every entrepreneurial firm. There will be some pangs and some pain. Sometimes people are less happy that I am not around, they expect me to be there at every function. I can't do that anymore-so people are getting used to having Manoj (Kohli) or Atul (Bindal), Akhil (Gupta) do reviews. Our new structure will come up by end-March which will put the entire thing in place.

What do you see as the future trends in the telecom industry in India?

You will now see growth on the services front. We recently launched the electronic money transfer (EMT) service with the State Bank of India at the 3GSM World Congress in Bareclona and I am heading the global initiative on behalf of the GSM Association. Today, if I send 50 pounds from the UK, for a same day transfer I pay 12 pounds. Through EMT I can do it for the price of an SMS! Services like these will be the new trends that will emerge.


Other Story Links...