Like the rest of the industry, Bharti Airtel may be seeing revenues flattening, and analysts may argue it needs to complete acquisitions like Zain to de-risk its business from the slowing Indian market, but its new CEO displays no such fears. Though he’s loath to give any estimates on anything (“We don’t give guidance” is a phrase you keep hearing), Sanjay Kapoor is clear that the future is going to see revenues rising and from new areas like banking, mobile commerce and entertainment — the company has already hired business heads from Citibank and mobile portal Hungama.com to drive this. Excerpts from an interview with Sunil Jain:
What will the new Bharti be like?
Since we’re no longer targeting only the customer’s telecom wallet and are instead looking at the overall wallet, we will be targeting all lifestyle applications like entertainment, e-commerce, gaming, health and so on. Do we have the ecosystem and the skills? We have some, we can train our people on some, and we will bring in the rest externally. We’ve got Sriraman Jagannathan from Citibank to drive our e-commerce stream and Saleem Mobhani from Hungama Digital Media to head the entertainment business — they’ll bring new ideas to the business.
How will this change the profile of the people you hire? Will they be younger, more tech-savvy or what?
That’s difficult to say and will depend on what business (entertainment/gaming/e-commerce/advertising/etc) gets more traction, but it is very clear that the need for younger employees will keep increasing. Also, keep in mind that we’ve seen our customer base rising five times in four years but our employee base hasn’t risen, so there’s the outsourcing option as well. We have a Young Leaders programme where we hire young MBAs for our fast-track process and they’re agnostic to telecom, banking etc. Do you know that we earn more revenues from music downloads than the top three or four music companies in India put together?
So will you be getting into producing films like Anil Ambani is? Given his library of films, he will probably have an advantage over you when it comes to the entertainment business.
We’re getting into the game at a pre-production phase now. So, we did stuff on My Name is Khan before it was released, before the Internet had anything. We’ve got entertainment events around Avatar … there are games and on the interactive voice response (IVR), you can speak in your language while you get a reply in Navi. But we are not going to buy content, we will only market it. The moment you buy content, you restrict yourself — we are open to anyone with entertainment content and will do a revenue share.
If you look at global markets, the revenue share for those developing applications — music, games, movies, etc — is much higher than what you give. Doesn’t this restrict the market for applications?
Not at all. Look at the size of the market and see what this “small” revenue share adds up to. When markets are small or not growing as fast, you need larger revenue shares — in large markets and those growing as fast as ours, the issue is the absolute amounts you earn.
Five years from now, what proportion of revenues will come from streams like commerce, entertainment, etc?
We don’t give guidance but our dependence on voice will come down. It will vary from business to business — in fixed-line broadband and enterprise, the business will be predominantly data-driven … In five to seven years, everyone of us will have multiple SIM cards — one for telephony, one for credit transactions, one in your car for tracking it, one in your direct-to-home (DTH) set, one to activate your microwave from your phone/computer … each one of these chips will generate revenue. This will help retain customers as well as raise revenues. I can’t say how much, since it is both early days and also sensitive information.
Revenues are growing even in saturated markets of the West, where there is 100 per cent and more penetration — the reason why they’re growing is newer and newer applications.
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Is the market for internal remittances around $10 billion or more, and will you be allowed to transfer this money on your own, without involving the banks?
Around $10 billion is transferred each year through the post office. The industry has 1.6 million outlets and can do these transfers at a fraction of the cost anyone else can. If it costs X to service a customer at a bank and X/2 at an ATM, it can be done on a mobile at X/10. So, allowing mobile phone firms to transfer the money directly is a matter of time.
Today, you can transfer money across banks but you can’t do that across mobile phone firms — a Vodafone customer can’t transfer money to a Bharti one, for instance. Are you working on an inter-operable system?
Twenty-three mobile phone firms have tied up to create a common apps store just a few weeks ago! The global system for mobile communication (GSM) mobile platform is all about interoperability … this money transfer may not be interoperable today, but it will be in future.
So will the revenue stagnation that we’re seeing soon go away? By how much will revenues rise?
The stagnation you talk of is in revenues, not in customer numbers or talk time, which are growing very well. Revenues are depressed because of hyper-competition and unsustainable tariff plans. This has to change and several firms will close down. This is also why many firms that got licences have not yet rolled out their networks. The M&A rules will change to take account of this as they have in other parts of the world … If they don’t, firms will close down and their spectrum will not be used by others (it will be “stranded”).
How will revenues rise due to this?
I won’t give guidance but you can do the maths yourself. Around 25-30 per cent of all customers today are really those holding multiple SIMs to take advantage of the low tariffs that various new operators offer. Once players start closing, this revenue won’t disappear, it will accrue to the companies that survive. All tariffs that are below cost will have to move to cover cost.
How will revenues rise after 3G?
It depends on how customers take to 3G, but once mobile phone prices fall to $60-70 — as they will once India offers 3G since this will mean the volumes will build up — the market will do well. The data business offers another great opportunity since India’s real access to broadband, as happened in the case of the low-speed internet access, will happen through mobile phones and not through computers.