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the-south-asian.com July / August 2006 |
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August/September Contents
Sufis - wisdom against 50
years of mountain Heritage cities:
Cotton - the fibre of
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Page
6 of 10 Telecom & Software - Trends & Future in South Asia
(cntd.) by
Salman Minhas
First published in
December 2001
SUNIL BHARTI MITTAL [ SBM ]
Mittal is a graduate of
Punjab University and Harvard Business School.
Value /Wealth created by
2001 is about $ 1-6 billion.
Sunil Bharti Mittal or
SBM as he is called, has at the age of 43 created a Telecom Giant in India .
It has risen from humble beginnings in 1970’s as a bicycle parts
manufacturer, knitwear and stainless steel utensils in Ludhiana, Punjab
state. Together with other foreign companies he has raised $ 1.5 billion of
which $ 800 million is still in the bank.
Singapore Telecom
SingTel has invested $ 400 million , and Warburg Pincus the New York based
investment bank have about a combined share of 40 % in Bharti Telecom ; IFC
, AIF have another $ 100 million invested in Bharti. Other partners are
British Telecom -BT , Swedish Telecom operator Telia.
SBM’s father was an MP
in the Indian parliament and a a friend of Prime Minister Narasimha Rao.
However Sunil went his own way .
Bharti Enterprises
controls about 20 % of the Total Telecom market in India . As he puts it ,
it was a mixture of Vision , good luck and hard work by a team of about 10
-12 senior people. The early beginnings in 1985 were in manufacturing
telephone handsets. They did not have the expertise to do telephone
exchanges , jelly -filled cables had become a commodity and their capital
investment was high.
Initially 52 companies
were licensed to manufacture telephones; Today only three remain - Bharti ,
Tata and BPL. Between 1982-86 Bharti manufactured Fax machines, Cordless
phones, and telephones. SBM says that they stuck to telecom although every
entrepreneur was into paper mills , steel mills, mini-cement plants,
cinemas, and hotels.
He says they often went
to Sam Pitroda for advice, which was to wait for the telecom sector to open
up [ deregulate / privatise ]. As a result SBM says they were always looking
ahead and knew what was happening in the world markets.
In 1992 SBM got a
market study done for cellular phones. The study said that the market in
Delhi was 5000 cell phones. Anyway SBM says they threw away this report and
bid and got the Delhi cellular circle at a time when people said that Bharti
could not raise the Capital required for this project. Bharti later went on
to build and run Delhi cellular profitably. Even the Delhi Cellular License
was in Mittal’s own words an encounter with destiny .
In February 1992 , one
of the conditions for the Delhi cellular licence was that the bidder have
some telecom operators experience . He went and clinched a deal with the
French telecom group “Vivendi” after a three hour session with the CEO ;
On March 31 the deadline for the Delhi metro licence Vivendi backed out
saying that they would go with the Modi Group. After mustering all his
strength Mittal persuaded Vivendi that there must have been something that
made Vivendi deal with him and that Vivendi should trust their instinct and
work with him . He got the deal and Bharti Delhi cellular starting making a
profit 2 years ago.
The Bharti Group
The Group is focused on
different areas of business through independent JV companies: Bharti
Cellular for cellular operations, Bharti Telenet for basic services, Bharti-BT
Internet for Internet services, and Bharti BT for VSAT and WAN consultancy.
Others include Bharti Telesoft for telecom software development, Bharti
International for JVs in global markets, Bharti Televentures for projects,
and Bharti Telecom for telecom equipment development. This completes the
entire portfolio of telecom coverage. It has over $ 200 million of turnover.
It is the second largest player in terms of total number of subscribers from
cellular and basic services.
In the cellular
business, it started with Delhi operations and followed up in Himachal. Last
year, it invested about Rs 650 crore in acquisitions and bought JT Mobile (JTM)
in Andhra Pradesh (AP) and Karnataka, and SkyCell in Chennai. It is
contemplating to take over Usha Martin in Calcutta. It entered into alliance
with BPL and together they can ensure a seamless connectivity in Delhi,
Chennai, Mumbai, Maharashtra, Karnataka, Kerala, Tamil Nadu, and AP. The
real issue, according to him, was one of costing and to determine which
between GSM and CDMA was more effective. "We are currently betting on GSM"
added Mittal.
In Mittal's view growth
in Cellular phones in India is in Chennai and south India where it is a
economic necessity . In the north it is only in the Delhi greater region.
It has bought 100
percent equity in Spice Cell in an all-cash deal from Modicorp, which gives
Bharti cellular services in Kolkata to a base of more than 1,00,000
subscribers, saving time and money.
Bharti’s will not bid
for VSNL and instead consolidate its existing lines of business that
includes fixed and broadband services besides the cellular operations.
Mittal, has been supporting the raising of the limit of the Foreign Direct
Investments in telecom services to 74 percent.
Bharti - AirTel is rated
the India’s best cellular service operator. Bharti has a number of firsts in
Indian telecom. Its push button telephones to being the first cellular
service in Delhi, first private basic telephone service provider in the
country, first Indian company to provide comprehensive telecom services
outside India (Seychelles), fastest growing VSAT company in India and first
multinational Internet service provider.
Broadband Bharti.
Bharti’s national long
distance (NLD) service early next year and plans to acquire the 40
million DoT customers eventually" according to S B Mittal. The company had
earlier signed the license agreement to offer the NLD service in the
country. Bharti has put in place 10,000 km of fibre optic network across 50
towns in the country.
The Indian Government
has divided India into 21 telecom circles for providing the NLD service.
These circles have been further divided into 322 long distance charging
areas (LDCAs) and these LDCAs have been split into short distance charging
areas (SDCAs).
Mittal says that in
India only about a quarter million new subscribers are added every year, and
that they plan to increase that to a million per month. In China, mobile
operators attract four million new subscribers per month with a total of
about 40-50 million mobile users , a number that has exceeded that of the
USA.
Moreover, it has emerged
as India's largest mobile services company covering over 600 cities and with
the largest international roaming service in over 47 countries and 106
networks.
Bharti is
getting ready to launch long distance services across the country and it is
laying optic fibre cable across 200 cities. Bharti is also putting together
a $650 million undersea cable project along with its partner Singapore
Telecom connecting Chennai with Singapore. For Sunil Bharti Mittal Sunil and his brother Rakesh who started about 20 years ago selling telephones in the Parliament Buildings that Edward Lutyens designed , this has been a long and winding road selling telephones on their modest scooters to becoming the Telecom giants in India.
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