Sunil Jain’s ‘Bharti, MTN and 3G’ (October 5) is an exercise in fantasy. The global experience of 3G has shown that the bulk of traffic remains voice traffic, and not data traffic. India is even more of a cost-sensitive country, how does he expect Indians to suddenly start using large amounts of data? In any case, data revenues for the industry are just around 8-10 per cent today and Jain expects these to rise to roughly 40 per cent of the total industry revenue in another 5 years!
He is right, though, that just because ARPUs are declining doesn’t necessarily mean the industry is in bad shape. What matters is the return on capital, in this case, the return that can be had from each base station that is set up. And this is something that Bharti has demonstrated very well. Indeed, the biggest benefit from the Bharti-MTN deal, had it happened, would have accrued from the cost savings that Bharti would have been able to derive for MTN — if Bharti was able to increase MTN’s capital efficiency and bring it up to around Bharti’s levels, MTN’s profits would surge and a large part of these would automatically find their way into the Bharti balance sheet.
N Kumar, on email
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