As he moves on to a board role, Vodafone-Essar’s CEO underlines the need to conserve capital, especially for the newcomers, and promises not to second-guess his successor.
During the decade and more that he headed Vodafone-Essar (it was called Hutchinson Max Telecom when he joined), a time when it metamorphed from being a niche player to the country’s number two, beating even BSNL with a 24 per cent market share, Asim Ghosh always did things differently. Unlike market leader Bharti Airtel which expanded its geographical coverage aggressively, Ghosh chose to remain selective (some colleagues argue Bharti’s growth is higher in precisely the areas where Ghosh chose not to bid for licences when Bharti did); at a time when everyone made big money in long distance telephony, he chose not to get into it. The biggest difference with Airtel, and this is why this Lunch with BS was so many years in the making, is that unlike Sunil Mittal, Ghosh still remains shy and aloof (Mittal routinely calls up journalists to cajole or argue with them, Ghosh will leave it at an SMS or two, if that). Since he’s retiring now (the farewell’s tomorrow), Ghosh finally relents, but is still not as frank as you’d like, perhaps because the shareholders (read Vodafone, not necessarily the Ruias of Essar) still want him as a director, says Sunil Jain.
We meet at the Chambers club in Delhi’s Taj Mahal Hotel, a convenient location since Ghosh is there for a BS jury meeting (the one that selected Meher Pudumjee of Thermax as the CEO of the year some days ago). Ghosh does the ordering and though he doesn’t eat too much fish outside his house, he does today since he says he likes what they do with it. So there’s a bit of a discussion on where the fish is from, we settle for sole (it should have been clam since there’s little baring of the ‘sole’!), a cream of spinach soup and the usual steamed rice and Chinese greens. Unlike several Bengali men I know, Ghosh isn’t into cooking; he gives the usual work-life balance reasons for looking forward to his retirement, though a tinge ruefully wonders if you can ever make up for lost time; he’s dismissive of the whole quality-time justifications given by most CEO-types. His wife’s an ex-banker who became a teacher in order to look after the family while he trotted around the globe (he began with P&G in the US and was co-CEO of Pepsi Foods in India before joining Hutch); the eldest son’s doing a PhD in neurology in London while the younger one, the mathematician who wanted to be a musician, is doing a PhD on the stochastic investigation of cellular mutation (Ghosh understands the cellular bit!) in Holland.
So have the levels of corruption in the industry gone up, I ask for the record, before getting to the juicier story of how, despite the cellular mobile firms having won the battle, at the TDSAT in 2003, to block Reliance’s illegal entry into the booming mobile phone sector, the industry decided to make peace with the government — over the years, the story’s been that Sunil Mittal said he’d split the association if it didn’t smoke the peace pipe. Ghosh makes his point much the same way the sole makes its flavouring known, subtly: “In the ten-and-a-half years I’ve been here, I’ve never had an improper request from any government official.” Politicians, it remains unsaid, are not ‘officials’.
And Sunil Mittal? Ghosh insists it was a collective decision by the industry; you can’t take on the government beyond a point given its powers to influence even your day-to-day operations, from not granting wireless clearances to ignoring the pretty routine abuse of foreign investment guidelines (the last bit, Ghosh does not say, and more on this later). I know a few more details of the bitter fight within the cellular camp, and so probe a bit, but Ghosh’s not biting, so we move on (‘I don’t know how I’d have played it any different today’).
We don’t get into details of what led to a handful of firms getting telecom licences for around Rs 50,000 crore less than they were worth; instead we talk of whether these new chaps will survive, given how the best customers have already been acquired by firms such as his and Bharti Airtel, on the fact that their truly global scale makes any price war by the newcomers virtually impossible. Whoever starts off now, Ghosh is confident, will be in for a tough time; as he puts it, ‘certain decisions were taken in a bull market which ended in August last year and the organisational momentum is what carried them through’. Though telecom is often talked of as part of the new economy, he says while there’s an important tech part to it, at the end of the day, as in other old-economy industries, it’s the amount of capital and how you utilise it that matters. So will the new guys just sell out to firms such as his and Airtel? Not unless the rules are changed — consolidation in the industry is critical but since the rules say firms that are consolidating will have to return spectrum, it makes things difficult.
Wasn’t he just a pawn for Vodafone? — the company’s foreign shareholding was above what the law permitted, which is why he was given a stake in the company. Ghosh is unruffled and sticks to the party line, that he and not Vodafone was the beneficial owner of the equity stake. Why did Vodafone’s news release on February 11, 2007, then say it was acquiring ‘companies that control a 67 per cent interest in Hutch Essar from Hutchison Telecom International Ltd’ — since HTIL owned around 55 per cent of Hutch Essar, Ghosh was clearly a proxy for HTIL, I say. Ghosh gives an explanation for the news release I don’t quite understand — on how it had to with some post-Enron reporting norms. It was sweat-equity he adds, while admitting that the ‘FDI rules created the opportunity’. There would be, he says by way of justification, no Sunil Mittal if the FDI rules didn’t create the opportunity for regulatory arbitrage. At the end of the day, he says, India’s telecom would have been controlled by an AT&T or a Vodafone hadn’t it been for the rules; once you’ve got more than 50 per cent foreign equity, he says, the other arguments to not allow full foreign ownership (India’s rules allow 74 per cent) are all manufactured for commercial reasons. He concedes the national security angle, but says the government can make the telco do whatever it wants (offer tapping facilities to intelligence agencies after due authorisation, for instance) and these have nothing to do with how much foreign equity there is in the company.
Does he regret not getting into long distance telephony in time, in not buying up more licences aggressively like Mittal did in 2003, given this is what accounts for the huge difference in their subscriber numbers? Not really, he insists, the company cut its coat according to its cloth; the long distance licence and obligations didn’t make it worthwhile at that point; instead he conserved money to manage the BPL acquisition which gave the company valuable spectrum in the 900 MHz band (which is more efficient than the 1800 MHz spectrum that others got) in states like Maharashtra, Tamil Nadu and Kerala — don’t forget, he compliments himself, ‘we have a fourth Bharti’s equity, indeed Vodafone-Essar’s equity is less than even that of IDEA’. Which is why he’s not unhappy the 3G auction has been postponed — in any case, given the costs of new 3G phones and equipment and the limited number of high-end new subscribers, among others, he says the business case for incremental 2G spectrum is a superior one (on 3G: ‘On a spreadsheet, with a minor tweaking of assumptions, you can always come up with a great business scenario’).
Given his strong views on how the company should be developing, does it make sense to have him on the board second-guessing new CEO Marten Pieters all the time? He says he’ll try not to be a pain-in-the-butt director as most ex-CEOs are and gives some hint of how he plans to do this. He’s an avid photographer, but hasn’t done this in a long time; he plays golf and rides and has a shelf full of books he’s bought and ‘kept for the future’ which is now here. His travel schedule, certainly, appears just as packed. Whether he’ll succeed in his resolve, of course, is something that’ll get clear only when we do a Lunch with BS with Pieters!
