10 EF t2 2009

cover story Sunil Mittal

The
Basic facts NAME Sunil Bharti Mittal TITLE Chairman and
Group CEO COMPANY Bharti Enterprises HEADQUARTERS New Delhi
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EF t2 2009 11
Indiantiger
watch out for his next move
TEXT Nathan Hegedus PHOTO Chris Maluszynski
I
T IS EASY TO tell when Sunil Mittal embarks on a major
project he stops eating meat. In the early 1,,os, when Mit-
tal was bidding on his first mobile phone project, he vowed
to be a vegetarian until he could talk on my own phone.
Three years later, Mittal resumed eating meat.
But Mittal, and his ventures into vegetarianism, did not stop
there. Today Bharti Airtel has about 1oo million custom-
ers who use 1. billion minutes a day, and Mittal has
built Bharti Airtels parent company, Bharti Enterprises,
into a budding conglomerate, venturing into markets
from telecom to insurance, from retail to agriculture.
In India, Mittals resolution to give up meat is not unu-
Mittal says Bharti Airtel may have bene-
fited from not being among the first opera-
tors to introduce 3G. Early 3G was poor
and expensive, he says. We missed all
that. Now the technology has evolved.
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12 EF t2 2009
Background check
SCHOOLS Punjab University, Harvard Business School.
Started bicycle parts factory in hometown of Ludhiana
As background checks go, Mittals is one of the easier because he has
had only one job in his whole career, though that job has involved a
huge variety of things the hallmark of the entrepreneur.
cover story Sunil Mittal
Mittal foresees consolidation in the Indian mobile
sector, as new operators fail to achieve the neces-
sary scale for survival. And, worldwide, con-
solidation will also remain more regional.
There are just limited synergies
between continents, he says.
Numbers of wireless subscribers
Number of wireless subscribers
India numbers include GSM, CDMA and WLL-F
0
50
100
150
200
250
300
350
400
March
2009
Dec
2008
Dec
2007
Dec
2006
Dec
2005
Dec
2004
Dec
2003
Dec
2002
India
Bharti
Source: Telecom Regulatory Authority of India
Million
1
0
.
7
7
2
.
7
7
2
8
.
4
4
5
.
5
4
8
9
.
8
7
5
.
9

1
6
.
3
1
4
9
.
6
3
1
.
2
5
5
.
2
2
3
3
.
6
3
4
6
.
9
3
9
1
.
8
8
5
.
7
9
3
.
9
1
0
.
7
7
2
.
7
7
2
8
.
4
4
5
.
5
4
8
9
.
8
7
5
.
9

1
6
.
3
1
4
9
.
6
3
1
.
2
5
5
.
2
2
3
3
.
6
3
4
6
.
9
3
9
1
.
8
8
5
.
7
9
3
.
9
Subscriber numbers for Bharti Airtel and the Indian mobile market as a whole grew by
more than 3000 percent between December, 2002 and March, 2009. The Telecom Regu-
latory Authority of India includes GSM, CDMA and WLL (wireless local loop) in its
national wireless market figures, though WLL is not a statistically significant factor in
the markets recent growth.
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EF t2 2009 13
sual his wife gives up chocolate during
their three childrens school exams but
what is unusual is Mittals savvy balance
between a masterful negotiation of the
Indian market and his application of les-
sons learned from decades of cooperation
with foreign companies.
Mittal is a man raised in the heart of
Indian politics, who built a telecom giant
in an economy just opening after decades
of relative isolation. He is also a man who
learned the value of long hours and preci-
sion in Japan, who came to appreciate
strong engineering and high-quality design
in Germany, and who flipped outsourcing
trends on their head by looking to Euro-
pean companies to run his networks.
India is often symbolized by the tiger.
And the booming and liberalized Indian
economy has lived up to this big cat image
in recent years, as has Bharti Airtel, now
the largest mobile operator in India and
the third-largest national operator in the
world.
Today Indian companies are venturing
off the subcontinent, looking to make a
global mark. Bharti Airtel is no exception.
Last year Mittal pursued a merger with
pan-African operator r: to create the
largest telecom company in the world.
The deal fell through, but Mittal remains
on the prowl.
We have a business model that works in
emerging countries and can be replicated, if
you look at our pathbreaking models of out-
sourcing things like networks, i: and call
centers, he says. And we want to test it.
ITS ALL ABOUT SCALE
Telecom is all about scale, says Mittal big
scale, scale on the order of tens of millions
of customers.
This is especially true in India, which has
the lowest tariffs in the world, around
uso o.o1 per minute. Without scale here,
you drown in losses. And in an ultracompet-
itive market of o million subscribers and
growing, Mittal has all the size he needs,
with a z percent customer market share
and a o percent revenue market share.
It is how you survive, Mittal says. It is
nothing but math.
But Mittal is not content to rest on scale.
He wants to leverage it, both to develop
India from the inside and to bring India
into the global spotlight.
In zoo8, Bharti Airtel and r: agreed in
principle on what Mittal calls a uso o bil-
lion merger of equals. The deal fell apart
at the last minute, dashing Mittals hopes
of transforming Bharti Airtel, as expressed
in a company statement, from a home-
grown Indian company to a true Indian
multinational telecom giant, symbolizing
the pride of India.
Almost a year later, he still looks disap-
pointed. r: was a great fit and still is,
he says. In late May, after this interview
was conducted, Mittal reopened merger
talks with r:.
Mittal says he will continue to focus on
emerging markets for any future acquisi-
tion bids, though he sounds intrigued by
possibilities in Europe. Can someone
grow their minutes in Europe while lower-
ing the tariff at the same time he asks. I
dont know.
In the end, Mittal dismisses all specula-
tion except to say, We want to go out, that
is for sure.
JAPANESE LESSONS
Mittal is the fourth-richest man in India
and the ninth-richest cvo in the world,
with his family worth about uso ;.; bil-
lion, according to Forbes magazine. Yet
Mittal walks alone, and quickly, through
the halls of Bharti Enterprises relatively
modest corporate headquarters in New
Delhi. He is friendly but focused, smiling
easily and answering fast, with an air of
finality to each on-message response.
Mittal is a self-made billionaire, and his
tale of tenacity is etched into the algo-
rithms of internet search engines. The son
of a politician, he borrowed uso 1oo to
start a bicycle crankshaft factory in his
hometown of Ludhiana, Punjab. He built a
booming business importing generators
from Japan, and he has said that in Japan
he internationalized my concepts, learned
the art of diplomacy in international trade.
The generator business died when the
government banned his imports, doling out
exclusive domestic licenses instead. He dis-
covered the electronic pushbutton phone in
Taiwan and moved into telecom in 1,86, his
Bharti TeleTech remains the dominant man-
ufacturer of landline phones in India.
Mittals big break came in 1,,z, when
the government began issuing licenses for
mobile phone services, and Mittal won the
bid for the Delhi circle. Other operators
foundered in oceans of debt, but Mittal
picked his spots for acquisitions and
expansions well, slowly climbing toward
profitability and market dominance.
Mittal credits his foreign partner-
ships unusual for India back then for his
companys success. Over the years, he has
worked with Ericsson, Nokia, Siemens, n:,
:x:, Telecom Italia, inr and Vivendi,
among others.
For a young company to tie in with
these behemoths, they must have seen
something special, he says.
One of Mittals most dramatic foreign
moves came in zoo, when he signed an
agreement to outsource much of his net-
work infrastructure. It was about effi-
ciency, Mittal says. Who knows the net-
work best The manufacturer. Why not
have them run it for us
Outsourcing allowed Bharti Airtel to
scale up very quickly, Mittal says, and
focus on distribution, brand, innovation in
services, and collection. He emphasizes
that the outsourcing was done for practi-
cal, not financial, reasons and that all of
the companys networks remain on the
books.
But he would not mind if they were off.
Our ultimate goal is to get to the state
where we just buy minutes off the net-
work, a network which could serve two or
three companies, he says. But that is still
some time away.
THE GAME CHANGER
For all his interest in the outside world,
Mittal continues to delve deeper into
India, both within telecom and in a series
of initiatives in retail, insurance and agri-
culture.
Within telecom, G is the game changer,
but not the way most people might think,
he says. In the us and Europe, G will be
centered in urban areas. In India, Mittal
believes G will make the most impact in
rural villages, where Indias crushing pov-
erty is at its worst and where Bharti Airtel
has opened zo,ooo service centers in
recent months.
Many of these villages have never seen
a fixed line, or any form of connectivity,
he says. They have only been connected
through wireless. They need broadband.
Imagine putting a handheld computer in
every village. It is a powerful thought.
Even in India, with its 1.1 billion
people, the mobile phone market will
plateau. In India we are seeing growth
now of zo to z percent, not 1oo percent,
he says. Mittal says that he and his
executive team (which includes his two
brothers, Akhil Gupta, deputy group
cvo, and a dozen other professionals)
know two things well telecom and
India but that the two do not have to be
linked.
We have done telecom in India, he
says. But there is more firepower, more
financial resources, available to be put
Our ultimate goal is to get to the state where we just buy
minutes off the network, a network which could serve two or three
companies. But that is still some time away.
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14 EF t2 2009
into other parts of India. We cannot let India
go by.
Mittal has launched a series of new cus-
tomer-facing businesses in the same way he
built his telecom empire, with foreign part-
nerships in long-insulated and mas-
sive domestic markets. These moves are
highlighted by a partnership with the us retail
giant Wal-Mart to open multibrand stores
that Mittal hopes will redefine Indian retail.
Mittal has also teamed up with x in life
insurance and asset management, and with
Del Monte Foods in agriculture.
Mittal says that, ultimately, he is a business-
man, an entrepreneur and an industry player,
not a politician or spokesman for India. But
he has also called Bharti Airtel an Indian
champion, and he is clearly trying to build an
Indian business giant, not an untethered mul-
tinational. This sense of national purpose and
pride seems to drive much of his quest to
export India to the world and import the
world to India.
In a recent television interview, Mittal was
asked whether he is eating meat, because
when he stops, something big occurs. It so
happens that Mittal went vegetarian again
early this year, though he says he has no spe-
cific project in mind. Maybe this time it is for
the general good of mankind! he jokes.
Mittals eating habits and personal resolu-
tions are not the real reason to follow Bharti
Enterprises. Mittal is worth watching because
in his moves there is always a complex inter-
play between the Indian and the international.
He is worth watching because the stakes in
his moves only get higher, whether he is
building a worldwide telecom giant or helping
transform the Indian countryside. M
Many of these villages have never
seen a xed line, or any form of
connectivity. They have only been
connected through wireless. They
need broadband. Imagine putting
a handheld computer in every
village. It is a powerful thought.
Where do you see yourself a year from now?
FOR THE NEXT YEAR I will be strengthening our organizational structure, tak-
ing a clear view on new projects and their trajectory.
What about in 10 years?
IN YEARS, I expect the Group to be a successful conglomerate. I have no
doubt that Bharti will have internationalized itself within that period and,
therefore, I will have spent a lot of time looking at overseas businesses.
A founder remains a founder, and whatever job one ends up doing, one is
more or less in the same position as the head of the Group. The good news
on our front is that we have professionalized our business to a point where
it is easy to separate shareholder and managerial responsibility.
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Sunil Mittal cover story
A young market
The most important thing to
know about the Indian economy
is that it is young, says Sunil Mit-
tal, the chairman of Bharti Enter-
prises.
FOR DECADES after Indias 1,;
independence from the u, the
government kept markets
largely closed, handing out
exclusive licenses that made a
few conglomerates and their
leaders very rich, hence the
term license raj.
THE GOVERNMENT began loosen-
ing restrictions only in the
early 1,,os, and since then
India has boomed, transform-
ing quickly into an economic
powerhouse with a trillion-dol-
lar economy. And even in a
deep worldwide recession,
Indian companies have started
looking beyond the subconti-
nent, acquiring companies in
both emerging and more devel-
oped markets.
India is no longer a sleepy
backwater, says Mittal, who
built Indias dominant mobile
operator, Bharti Airtel, from
scratch. Companies have
evolved with high corporate
governance and cutting-edge
technology and services. They
have developed skills in India,
and now is the time to go out, as
European and American com-
panies become available, espe-
cially because sectors like man-
ufacturing and some services
are priced low to acquire.
YET ON THE other hand, the open-
ing of the domestic economy
has sometimes been a start-and-
stop affair, with many still per-
ceiving it as a somewhat closed
shop marked by damaging pro-
tectionist limits on foreign
investment and imports.
Mittal says this is a mispercep-
tion, that only a handful of sec-
tors such as retail, insurance,
defense and banking remain
highly regulated. Many countries
around the world still restrict
foreign involvement in these
areas, he says, and further loos-
ening of restrictions is on the
agenda of the government.
MOST OF THE economy is open,
he says. You can just come in
and set up shop and start oper-
ating.
But Mittal says that the most
important thing to remember
about India is, again, youth.
India is a country of 1.1 bil-
lion with percent of the pop-
ulation under z years of age,
he says. It is a continent of con-
sumers. As the world struggles
to find growth, India is only
struggling to regain momentum.
The growth is there. M
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