Davos:
Sunil Bharti Mittal, chairman of Bharti Airtel and the voice of the industry, is a regular visitor at Davos.
He believes that the mood this year is neither of euphoria nor down and out. He spoke to NDTV Profit on the sidelines of the World Economic Forum and spoke on a range of issues from policy in India to challenges in the telecom industry.
Below is the transcript of the interview.
Shweta Rajpal Kohli: The mood is extremely low this year. The World Economic Forum survey says that there is a sharp decline in the confidence?
Sunil Bharti Mittal: No, I wouldnt say that the mood is extremely low. In 2008, I would say that the mood was really down and out. This time the mood is not euphoric. But it is certainly not low. I think people have a lot of question in their mind on where the world is moving, what will happen to their products and services and so on. So I would not be that disappointed.
Shweta: It is great that you are not disappointed. Then there is some optimism right now. Global CEOs are saying that as far as Indian CEOs are concerned they are extremely worried about three issues, Infrastructure, overregulation and inflation. Do you think that overregulation is a key concern for the Indian leaders right now?
SBM: I would say that regulatory uncertainty is certainly a key concern. We need certain regulatory environment and we got that in 1999 when the policy was laid out. For a period of six, seven or eight years, there was some solid growth in the telecom industry in the country. The National telecom Policy or NTP 2012 needs to get to the same level of certainty in regulation. This will ensure that in the next five to seven years, India can see the broadband story really emerging.
Shweta: But there are concerns about how the policy will pan out. You along with other telecom bosses are meeting with the telecom minister and you have been meeting even the prime minister. There is a lot of regulatory uncertainty in the telecom sector. How badly is it impacting the sector?
SBM: I think the fear is that the government is going to not necessarily overregulate this industry but over charge this industry for getting too much money out of this industry. I do not think this industry has enough money left in it to give much more to the government. Especially, after the 3G and the broadband wireless access or BWA spectrum auction where Rs 1,00,000 crore had been sucked out of the telecom industry. I think that is where I will appeal to the government and the political leadership to have a balance between government exchequer and the capacity of the industry to pay. You will certainly see a massive increase in tariff if the industry is going to be hit by a large amount of money and spectrum.
Shweta: What is the rationale behind this entire policy move of overcharging the telecom industry? We know that there are concerns with regard to revenue generation that the government had. But what is really driving the mood within the government now to overcharge the telecom sectors you putting it?
SBM: Well I think it is the environment. I mean if you look at environment cases being pulled out of the woodworks, against bureaucrats. All the government agencies are very active. In this environment its very safe for bureaucrats and officers to err on the cautious side and bat in favour of perhaps undue revenue generations of the government at the cost of hitting the industry. I think that is where the political leadership should come in to say, We as the country leadership need to ensure that the telecom sector is a very vital sector. That is what I hope that the minister, the prime minister, the finance minister will take a considered view of balancing revenue maximisation of the government and health of the industry.
Shweta: Some of the changes that are being proposed, especially in the spectrum pricing, that is certainly bound to kill the telecom industry already we have seen a lot of sheen that has gone away from the sector?
SBM: I think the telecom story, which was one of the finest stories in India, is no more that finest story. I can accept that. The telecom industry has gone through a massive upheaval. Entire industry margins have been eroded. There are very few companies that are making any kind of return of the capital that they have deployed and holding back investments in the sector. So I would say that this needs to be corrected and not only for the telecom sector but for the infrastructure of the country. I think this particular industry needs to flourish for the benefit of e-commerce, online education, mobile health and lot of other things that this can do. I really hope that in the final analysis picture will not look as bad as it is looking right now.
Shweta: But the picture right now is pretty bad for the telecom sector. We know that we have a seen a mega scam that hit the telecom industry. How badly has that scam impacted the mood in the industry, impacted the sector and overall the environment?
SBM: I think customers on the street really dont bother. They want telecom services at affordable rates, they want competition, they want choice and I think in many areas the government has been able to successfully do that. These include mobile number portability, ensuring that tariffs remain within the reach of the common people and encouraging people to go into the rural areas. So I think on the ground things are okay. It is only at the upper end of the policy maker where people are feeling as little concerned about making moves that may be seen as a balanced pro industry.
Shweta: So it is a pro industry sentiment right now which is something that nobody wants to go with clearly and that has become a big concern. You also met up with the prime minister on a very specific issue with regard to the 3G roaming packs and the fact that those agreements are not being honoured. Industry bosses even say that they will actually pull out. They are also saying that give us refund our 3g money. How serious is the issue for you to take it up to the prime ministers doorsteps.
SBM: we did not take this issue to the prime minister. There were plenty of other issues that we discussed. I think it was wrongly mentioned that the 3g was taken into prime ministers doorsteps. They are not correct but we believe as an industry that the 3g ICR was embedded in the auction process of 3g. I think most people in the telecom department feel that it is a desirable thing to have. But there interpretation of the paperwork they see is different from ours and thats why we are on the course with each other.
Shweta: The 2G scam has had a very negative impact on the industry but also the 3G auction. You said that the industry is responsible for the high amount of bids for 3G. How badly do you think that has impacted the overall growth in margins in the telecom space?
SBM: First of all, I will not hold the industry entirely responsible. It is true that we bid such crazy numbers. But if you look at it, there were only three slots on offer. The government at least should have 4-5 slots that would have tapered off some of the heat that was there. Secondly, there was no 2G spectrum being allotted for years and the only way to move forward was to have the spectrum of 3G at any cost. And that is what happened. I mean we paid ridiculous amount of money and in my opinion the 3G bidding has taken the lights out of the industry. So the amortization of the money that we paid for the 20 years and the interest is bothering the industry. 3G revenues are going to take many years to come through.
Shweta: And which is why we are seeing tariffs moving only northwards here on is that correct.
SBM: I have no doubt. I mean either the government takes a position that they are going to take a balanced approach towards spectrum charges. We cannot see 3G tariffing coming down as fast as the voice tariffs came down. If on the voice side the spectrum is going to be charged at an exhorbitant price be prepared for high tariffs.
Shweta: The 3G roll out clearly not as expected. What is going to happen here on for the sector?
SBM: The data pick up is very big but when the base is small, the percentage even if it is healthy double digit or triple digit does mean much. But I go around the globe. I sit on many of the high tables of the telecom industry. In the next five years, data will be the main thrust in India on 3G or BWA on wifi. So you will see a very large consumption of data building up.
Shweta: Let us move away from the telecom sector and talk about concerns of the industry. You are one person who raised some of these issues. You are really the voice of corporate India. Never in the past have we seen industry leaders so vocal about criticism of the government. Never in the past did we see sector specific meetings taking place so often at such high level. What is driving this mood within the Indian Industry?
SBM: First of all I dont think there is a criticism of the government. Infact we are out there to support the government. And I have personally written to the opposition parties, have spoken, met them pleaded with them to see if there are issues in parliament and certain legislative actions which we need to be supportive of the position that they need to do. So are we criticizing government for not having got the FDI through for FDI insurance and multi-brand retail? The answer is no. The government is doing its part. It is the opposition which is not being coming out to support some of these important legislations in the country. And we also know that the government is coalition government. It has compulsions and I think we must recognize that. But whenever we have met the prime minister and the finance minister there has been nothing but very strong support for the industry issues and problems.
Shweta: That is true but given that we know that the current political environment is likely to continue. Most industrialists and captain of industries believe that after the state elections are over we will see reforms being fast tracked. Are you equally hopeful do you think that will happen? Do you see a major change after the state elections as far as the reforms process is concerned?
SBM: Well we all live on hope and I am an optimist. The fact that the government did move very strongly in the last parliament session and if they had it there way, a lot of things would have gone through. This was due to lack of support from coalition partners and the opposition. So a good verdict in assembly election should strengthen the government and they should be able to move forward more decisively.
Shweta: All right we certainly hope that will happen. You are also representing India at this global forum in Davos. You are a regular in Davos how hard is it for you to sell the India growth story this year? Are people still buying it?
SBM: As I said on the fundamental level the growth story is intact. It is the investment side which is weak because people are not easily opening up to that extent. That also impacts the foreign investments. If you see Indian industrialists not investing as they were doing in the past that impacts everyone. So I think we need to fix our mood. The fundamentals are strong. And if we will believe in the India story the whole world will believe in it.
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