Business - Talking Telecom Idea CEO

You are entering Mumbai, perhaps the most mature market on the subscription curve in India. There are five to six 800-pound gorillas in scrimmage here. How do you prepare for such a battle?

Yes, in terms of penetration Mumbai and Delhi have the highest. Mumbai will be tackled in a way only a company like Idea can tackle —- I may sound vain, but that is OK. It would have been lovely had we been here ten years ago, you and me would have been carrying Idea numbers. But time has elapsed and we are cognisant of that. I guess when Idea is in Mumbai, it will have brand preference and stature almost instantaneously of being among the leading companies. Nobody will ask, which is this company? There are several reasons for it, including the fact that we are the No. 1 in Maharashtra and Mumbai is its capital.
But why should anybody shift to Idea?
We are launching a top-notch service and everything that goes into it, network, products, processes, customer care. We will change telephony standards. We are a known brand, part of a known group. We have lots of national and international customers who will be travelling to Mumbai. So we have a lot of synergies in our favour. The most important thing for us to do is appeal as among the top brands in a pool of seven or eight brands.
You aim to be in the top five?
No, a much much shorter list. Top five is far too many. I am talking of share of new gross (subscriber) additions here.
Do you think brand recall or identity alone will ensure that?
It?s not a question of brand recall or identity divorced from brand promise and delivery. Telecom service is a long-term engagement with the customer. People might be induced by price or tangible attractions, but a lot of people join a service with the intention of staying with the service. There the pedigree of a company comes into play. That is, this is a lambi race ka ghoda (a horse meant for a long race). That’s where we will score.
How much would you be spending in Mumbai?
I wouldn’t like to share that now, but let me put it differently: From Day 1, we will have a very high-quality all-round service. So it wouldn’t be a situation where we are spending as we are growing. Our investments, financial and managerial, precede the day we open for business.
Is inflection point a past-tense in urban telephony?
Everything is growing. In telephony growth you have something called the hockey stick curve: after a certain point, the gradient increases sharply. Then, after a point, the rate of increase blunts. It depends on the level of penetration, need, affluence and region. There is no general answer to this. Different regions are on different points of the curve.
Specifically, is Mumbai too full a market?
Mumbai and Delhi have gone past that stage of dramatic growth.
What would be your break-even date in Mumbai?
It would be at least two years.
Would you be compelled to play the pricing game?
Idea is always competitively priced, and value for money, but is never a discount brand like some others.
Are you going to share infrastructure?
Yes. A lot of our infrastructure is shared.
Does that mean Indus?
Yes, Mumbai is part of Indus territory.
How much focus will be on rural growth?
More than 50% of our net additions last fiscal year were in areas marked as rural as per the 2003 census.
Isn’t it a volume game there? You cannot have premium price…
You cannot have premium prices anywhere in India. People wonder how we do business at current prices.
How much profit does a mobile operator make for every rupee worth of call?
There is no fixed answer to that. We made losses for ten years in a row. We turned in a cash profit only two years ago. Of course, we are doing rather well now. But even today some big companies are not profitable.
How important is 3G for Idea?
3G is as important to us as a leader as to anybody else. It’s a complex subject. The right policy for India would have been a 2G-3G integrated framework. That is more efficient than a 2G or 3G stand-alone framework from a national point of view.
Does something like that exist anywhere? How is the framework?
It exists everywhere there is 3G. The most efficient network is a 3G overlay on 2G. There are few exceptions but a majority of operators globally use an overlay of 3G over 2G.
What about regulatory issues?
The whole regulation of mobile telephony revolves around how to introduce full-blooded competition in a sector, which, architecturally, is a natural monopoly. You have to regulate interconnect and you have to regulate spectrum, which is a scarce raw material, the efficiency of which increases more than proportionately with the size of the tranche. Much of the talk that finds its place in the media is mere sloganeering and lobbying.
So is there scope for inter-operability between telecom players?
That’s right. In a place like Mumbai, it is hugely inefficient to have six operators doing 2G and another six doing 3G. It does not mean you give six guys a free ride. But you need to understand capital and operational productivity of what are eventually national assets.
On the dual licence issue in Karnataka and Punjab, Idea has sent a couple of letters to DoT and the government. What’s the ground-situation now?
This question has been played up by sources other than our company. We have a composite transaction broken into elements because of various regulatory agencies involved. And this was signed on June 25. Our letters have given full details of the transaction .Now we have a situation where two 12-year-old companies are merging through a court process; they operate largely in different areas but with a few overlapping licences. But those overlapping licences are without overlapping operations because spectrum has either not been provided or has just been provided. Now we have to read this in line with the licence conditions, and Guidelines on M&As of April 2008.
So we have enquired about the various possibilities so that we can select from one of those. It is basically to enquire what the law is. Whatever the law, we will follow it.
Have you heard from DoT?
Not so far. I think the department is looking at it. I suppose they also want to understand the larger context. But whatever the reply, whatever the law, we will accept it.
Even if it means giving up the licence?
That is not our understanding of the law. But if it comes to that, yes. In fact we have said as much. But our assessment is that is not the case.
Did you anticipate something like that?
We did not have to anticipate, we were proactive.
DoT secretary Siddharth Behura reportedly said that there won?t be a refund of the Rs 300 crore licence fee…
I guess what he said was that in case the licences get united, then, effectively, one licence drops off. I do not want to put words into his mouth as I was not there when he may have or may not have said that. But it appears the report as it was presented completely missed the point.
On refund, the policy is that entry fee is not refundable. But here is a peculiar situation where you have paid the entry fee and spectrum has not been provided.
So whether such a situation lends itself to a different treatment is another matter, but the point that licence fee is not refundable is part of the policy. Generally speaking, on regulations, nothing would please us more than regulations that are transparent and equitable.
Have they been so to date?
The regulations?
Yes…
If you take a ten-year history, it has had its good moments and bad moments. But it is no secret if I say that personally I have not been very enthused with the standard of policy-making at certain times. If you see the NTP-99 (New Telecom Policy, 1999) document, it is a fine piece of policy-making and thinking. It is clear, lucid, correct, logical, forward-looking and clearly articulated. We have not lived up to the vision of NTP 99.
From 1999 to 2002 was the reconstruction phase … and I think that was a great period. Then we had this spectacle of mobile services being offered under a fixed services licence. Intervention was not done in time and it became difficult for the government to later set the clock back, and from that came the Universal Access Service Licence policy, which was the best Band-Aid then possible.
When you do things of that nature —- that is, a patch-up — then you destroy the underlying architectural foundation and logic of a policy framework. The consequences come to haunt the country later. Instead of a fifth licence auction, we had the fifth licences given out of turn based on the fourth licence auction prices.
Arbitrariness in the award of licences has been with us since. Now these precedents cannot be wished away. We have not allowed the Telecom Regulatory Authority of India and the Telecom Disputes Settlement and Appellate Tribunal to develop into what NTP 99 envisioned.
The inability to build quality institutions is one reason why the quality of policy-making is uneven.
You talk of out-of-turn allotments. Apart from some sporadic court proceedings last year, were there proactive moves from your side to set things right?
As a company we do speak up when necessary. We are not shy, but our strength is business; it is not lobbying. So we are not active in these matters. Fortunately, I think this sector has gone through a metamorphosis, which is not widely realised.
The metamorphosis is like this —- that people still associate success and wealth creation, with playing the system … by being lucky with the licences, being at the right place at the right time. It is basically a scarcity licence-raj mindset and shades of crony capitalism.
Fortunately, there has been enormous movement in the last ten years. Now telecom businesses are so big and so complex … the business of running a business has become a huge competitive advantage or disadvantage or a competitive barrier in itself. We have gone away from a situation of licence scarcity to licence abundance. The success factors for the next decade will bear no resemblance to the success factors of the last decade.
What is the status of Idea’s spat with Tatas?
It does not concern me. I am a manager of Idea and Idea has nothing to do with present or former shareholder issues.
What’s your take on number portability?
It will see the light of the day after nine to twelve months. To begin with, it is a nuisance for every operator. . But in the long run it removes customer stickiness to an extent.
Churn gets accelerated because of portability. So, with our kind of top service, we will be able to wean others away. Also, those who are starting services in other areas may eat into our customers. So net-net stronger companies with good services gain from portability. We, too, expect to gain from number portability.
You have been in the product business earlier … Asian Paints, VIP etc. How different is Idea, or the service business? The top-down view?
This is truly different. One, of course, is the fact that you are dealing with a scarce resource —- spectrum. Second, you have to interconnect with your competitor. Third, you often share infrastructure with your competitor.
Telecom is a huge infrastructure business. It has got more technology change or the obsolescence factor than many businesses. Even management, which really is the ultimate technology. Also, telecom is more an aggregation of local businesses rather than one large national homogeneous business Your network is your factory. Your factory produces minutes and the consumer consumes right here. Of course, there are many nationwide drivers of business. But local drivers are more salient in telecom than in other sectors.
Where do you see Idea five years down?
Bigger, better, stronger, perpetually learning, always humble.
How perpetually can five to six gorillas coexist?
This gorilla will be a bigger gorilla. Why should I count the others? But these assumptions are often oversimplistic. Some companies you describe as gorillas are among the world’s most competitive companies, and collectively we are providing our country an unparalleled economic, social and structural impetus. I am not an astrologer, but we have a very attractive set of cards, and we will play them with skill and diligence.
What’s written on those cards?
In more than half of India, we are among the top brands. In another half we are starting, and while we cannot make up for time lost, going forward we will compete with the best for new business, and shake off the laggards.
Do telecom operators gyp subscribers?
You are asking me to talk about others. We don’t gyp and good operators do not gyp.