Sunil Bharti Mittal is an Indian billionaire entrepreneur, and the founder and chair of Bharti Enterprises, which has diversified interests in telecom, insurance, real estate, education, malls, hospitality, agri and food besides other ventures. Mittal's Bharti Airtel is one of India's largest mobile phone operators with 413 million customers.
Hinting at telecom price hike, Mittal, 61, on Wednesday said India has the lowest tariff anywhere in the world but it will increase gradually.
"Gone are the days when you could have Rs 5-7 and you are sitting on a network freeloading- that’s gone now. You need to pay a little bit to be on the network," Mittal told CNBC-TV18 on the sidelines of the World Economic Forum in Davos.
On Indian telecom industry, Mittal said, "We are now in a market structure where consolidation has taken place. Therefore, we expect three mature players to stay in control in Indian telecom business in 2019,"
In an exclusive interview Mittal also spoke about 5G, disruptions by Jio and his company's Africa plans, among a raft of other topics.
Watch the video here:
Talking about what is happening in the business now and I will start by asking you about deleveraging because that is a key concern and Moody’s has red flagged that issue as well. What can we expect in three-prong strategy that you have laid out for deleveraging and also talk about the African IPO?
Africa has already raised pre-IPO money of $1.25 billion which has gone to deleverage. From $5 billion debt in Africa, it is now down to $3.7 billion out of which $700 million is for towers which is not a real debt to be repaid but just to be adjusted overtime. So $3 billion debt there and in 2019 we will have our IPO.
It was expected in the first half. Is it now been pushed to the second half? Is that the expectation?
I cannot say. Some pre roadshows are in the offing in the coming weeks. I would say we should stick to our schedule.
Which is, the second half or the first half?
It could be in the middle. We have always said June-July. There have been some reports that we will do it early in the year. There is an election happening in Nigeria in February. There are one or two other political developments and then we have March closing, so it has always been June-July. It was never February-March.
What is the expectation on valuation is given the fact that you did pre-IPO around $1.25 billion?
Take that as a lead into the valuation which some private investors have given. Now depending on when you arrive at that point in time we have to look at the performance metrics in Africa. It will all be decided at that point in time.
Let us talk about the performance metrics in Africa because that in a sense has offset the trouble that you are faced with in India and you have seen your margins go up to about 30 percent odd. Is there room for you to be able to do more, as far as the African side of the business is concerned?
In the last two years, African has seen a remarkable repair in turnaround and there are scopes for doing better. There are countries which are not kicking in, some of those countries should kick in over a period of time. So I would say there is always a scope to improve.
Now talk about India, do you believe that we perhaps have seen the worst as far as the bloodletting is concerned or do you believe that till Jio gets to 50 percent market share aspiration this is going to continue?
I cannot say anything on Jio. It’s their strategy. But I would say we are now in a market structure which is absolutely where we wanted it to be many years back. We have spoken about consolidation for over 10 years.
You told me that 2018 would be the year of consolidation and Idea-Vodafone happened. What are you telling me this year? What is 2019 going to be about?
I think three players which are there now, they are all mature players. One is moving rapidly from nothing to 30 percent. One has moved from 40 percent to 30 percent. We more or less stayed in 30 percent plus. So there are three players out there now and let us see how this will adjust going forward.
My view is that some more percentage gain and losses will happen in this process. Let the best man win.
Speaking of the gains and losses and ask you this and I had asked you this question last year as well on ARPU trajectory. Given what we are seeing the dynamics playout in India, you have gone from about 200 in FY15 to down to about 100 odd currently. Are we likely to see it go even lower from here?
There is no sign of that. We have taken a minimum plan of Rs 35 now. Gone are the days when you could have Rs 5-7 and you are sitting on a network free loading- that’s gone now.You need to pay a little bit to be on the network. This Rs 35, in mind, should go to Rs 75 someday. Also, remember at Rs 200, which is more like Rs 250, you used to consume 800 MB of data. Now at Rs 100, you are consuming 11-12 GB of data a month.
So you are consuming 10-11 times more and paying half. So I would say at some point in time, this should come back to Rs 250-300. It will still be lowest tariffs anywhere in the world and per megabyte charges would be a fraction of what people pay in the world.
You spoke about market share and you are now in the 30s band and Jio has gone up in the 20s band…
No, they are also in 30s now.
Okay. So what do you do to hold on to the market share that you have and perhaps even hope to better it?
I would say this is not the time to claim that you better your market share. This is a time to say we will hold on to our market share. 7-8 quarters, we have held on to our 30 percent plus share, but a lot of people have lost including Voda-Idea; they have lost from where they were when they announced. Therefore, I think we are holding pretty well. Our 4G networks are doing well.
What about 5G because Mukesh Ambani at the Vibrant Gujarat Summit said that they are ready for 5G rollout as well?
It will be very nice to see the 5G rollout in India as and when that happens. All I would say is we track technology closely, I personally participate in the technology development. As the chairman of GSMA, I have seen the development. Right now the mobile use case is still being developed.
5G is a technology which is looking for services, it is not the other way around, nobody is coming and telling us I want this so give me 5G. So, let us see what Verizon, AT&T, SKT and Softbank find on the other side of use cases.
India still needs to give mobile broadband in hands of more and more people and there is nothing available in the market place as services which cannot be fulfilled in 4G comfortably and in a very satisfying manner.
Robotic surgeries, autonomous cars, nuclear plants management, drone fleet management, the day it comes we will all be ready with 5G.
So you are not expecting anything significant to move on that front anytime soon?
I am saying the problem is when people start to talk about 5G, the regulators, the politicians get hooked on to 5G as it is going to be the Holy Grail. The fact is let us get the services and 5G will automatically come up. There is no question of it not coming up.
When you had the content available, when you had the devices available 4G became a norm. It will happen in 5G but you do not need to create 5G and wait for things to happen. It’s an evolution; from 2G to 3G to 4G eventually, it will be 5G and then we will be talking about 6G. So this will carry on.
Let me ask you about what can be the evolution as far as your content play is concerned because that clearly seems to be a competitive advantage on the Jio's side and they are investing on that?
I don't see it as a competitive advantage. You tell me which customer of mine is missing out on any content? We have everything. So, whatever my customer wants he gets it.
Does that mean you are not going to invest on content side?
Absolutely not. We will only invest in partnerships - Netflix, Amazon, Zee, Eros, get us the content, we will embrace them.
Let me also ask you about what is happening on the Infratel side. You have offloaded into a wholly owned subsidiary, when can we expect that stake sale, what are the drivers that you are waiting for before you?
We are waiting for our merger. The merger process is laborious, it will take a long time. There is a shareholders meeting coming up soon, after that we will go into the second filling of the motion with NCLT. We expect March-April the Indus-Infratel merger to complete. Once that is done, new shares are issued to Vodafone, Idea if they want shares or cash depending on what they want. So once that settles down we will start to look for a strategic buyer of a significant stake from us in Vodafone.
How much would you be offloading?
Hard to say at this time.
How much do you hope to raise?
It depends, in the merged entity as per the programmes submitted to NCLT we will have about 38 percent share. Let us see how much we want to keep and how much we want to sell and that will determine the amount of money you raise.
The next trigger will be somewhere after March hopefully if you get the regulatory approvals for the merger?
I would say some time in summer.
Equity issue, is that a possibility? People are talking about a rights issue, is that something that you would consider, is that something that you are looking at?
It is a possibility.
You have to setup a committee to look at fund raising options?
Yes, the committee has probably already met and they will be meeting and they have a number of options to consider. They will make a suitable recommendation to the board and then a decision will be taken.
What would be the most preferred option given where you stand today?
Could be rights, could be preferential allotment of shares and that is where the focus is at the moment. In a matter of 4-6 weeks we will know where we are.
What is the aspiration in light of the deleveraging plans in terms of net debt to equity, what is it that you feel you will be comfortable with?
I would like it to be less than 2 but at the moment we are at about 4 plus. So, the first step should be to try to get it below 3. On the other side, if the EBITDA repairs then automatically you get to do so. It is a function of deleverage a little bit, improve your margins a little bit and that could do the job. So, with stake sale, with some capital raising of some form, I think we will be able to get there.
What could be the kickers for margin expansion? You have talked about the deleveraging side and there are several uncertainties that you need to deal with in order for that to go through but what could be the margin kickers?
ARPU improvement, some customer acquisition as well but by and large ARPU improvement.
What will drive ARPUs higher, just the fact that there has been consolidation?
Yes. The fact is Indian customers were not complaining when he was paying Rs 300 per month for 800MB. If he can now get 15GB a month and still pay Rs 300.
But who is going to hike prices?
Slowly it will start to go forward. We have done Rs 35 as the minimum pack, that is the first sign, we have done it for the last few months and we are rolling it out all over the country.You are not fearful of moving down that road, you are saying that you have taken the first step and you intend to continue?
Absolutely. We want to give better value to customers, more innovative services, more bundle - Netflix, Amazon, Wynk Music, Digital TV.
Our bundles are getting good traction in the market place and more and more smartphone users are buying these bundles and we are seeing an improvement.
What about the fiber side of the business and what you hope to achieve there?
In fiber, we are much ahead of everybody else. We started this process a year back, fiber is being demerged into a separate company. We would like to invite investments there.
How soon can we expect that?
Again waiting for the de-merger and it much closer than the tower, it is much more advanced.
When you say much advanced, what do you mean exactly?
So, March you will go through with it or…?
We will have a separate company which will run fiber, which will run its own affairs. We would like to invite other fiber assets to come and merge with it like we did in Indus-Infratel earlier - Vodafone brought in their towers, Idea brought in their towers, this fiber company will invite every other company who has fiber to come and join.
On the regulatory side IUC, that is the big one coming up but what else are you seeing in terms of potential triggers that could weigh on the business?
Whatever had to be done is done. We are now so used to it that if one or two more things come, we will deal with it.
What could that one or two more things be? What are you anticipating?
Nothing but who knows surprised are always there. Right now I think all the things that had to go wrong for us in the regulatory arena has gone wrong, they are all sitting in the courts and let us see what decisions come out of the courts. But I think it is pretty much done, it is behind us now. You don't see noise now, you don't see those early days of Jio launch bringing in a lot of noise, cacophony, bad blood, I think that has settled down.Disclaimer: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.