What’s the mood in Davos this time? Is it upbeat compared with the previous years? Or is it downcast?
I wouldn’t say it’s downcast or upbeat, it’s mixed. There’s a lot of geopolitical overhang, especially as Ukraine and Russia continue (to be at war)…the war in the Middle East is also occupying a lot of mindspace. As far as India is concerned…it’s no more about selling (the) India (story), it’s more about listening to opportunities that we have.
People want to invest, want to come in. I’ve been coming here for over 23-24 years, from the time we were painting Davos with the Incredible India campaign…we’ve come to a point where selling is not required. Now it’s more about pricing…more about opportunities, the sectors where the thrust is. What’s also impressive is India’s spending on public infrastructure is being recognised. The country is at the Davos centre stage, very prominent in the discussions and in the IBC meeting, which is the key CEO forum here.
Coming to telecom…how do you view the current industry structure? People fear a duopoly is imminent. Is Vodafone Idea (Vi) going to survive?
It’s very hard to say…I’ve been on record saying that India must have three private sector and one public sector player…But we operate in several countries around the globe, especially in Africa (where) most countries are down to two operators. Europe is trying to get down to that level but hasn’t succeeded yet. Wherever there are too many operators, including India, we’ve seen there is fragmentation of spectrum and infrastructure, duplication of fibre and tower (resources)…it’s not a healthy situation. Sri Lanka, which had six operators, is now down to four. For a population of that small size, maybe two operators is the right size.
So for India, three private and one public sector (player) is an ideal outcome, but it can end up being two private and one public sector…because BSNL is now putting up a 4G network and is talking about 5G in the not-so-distant future. So in some form or shape, India will always have three service providers. Can it be four —that’s a question for both of us.
The government has come out strongly to support Vi, converting a very large outstanding (of its money) into equity. Government owns 33.1% in Vi and would like it to be healthy but ultimately it’s in the hands of the sponsors of that company to take the final call.Vi is falling behind —there’s been a lot of market share loss…in large parts of the country, (I’m sorry to say) they don’t exist anymore.When the (regulatory) payment moratorium ends in FY26 and spectrum payments become due, where do you see the market structure?
It depends. If somebody can come and do the funding (for Vi)…ultimately, it’s a company which has (over) 200 million customers. If somebody can stump up the money and have the wherewithal to withstand the negative cash flows for some years because it’s a tough industry where return on capital remains very poor despite lofty valuations, stock prices. What you have to see is the underlying return on capital…an investor who comes in to put a lot of capital into Vi has to be patient. You need, in my estimate, $7-9 billion to fill the gap which is there, and then be patient. (As for the market structure,) your guess is as good as mine.
What’s your take on Vi’s substantial dues for Indus? If you push for recovery, it might imperil the company, so is it a sensitive topic?
We can’t push for it wearing the hat of Airtel. We are a shareholder (of Indus), we are on the board. We keep on banging the table to say we need the others to pay, it’s not fair that one customer is paying and another (Vi) is not, and getting advantage in the market. There is a very large amount of dues. We have been promised by Vodafone CEOs in the past that these payments will be made. It’s been over two-and-a-half years — three agreements have been signed, and not adhered to. It’s a serious situation, and we’ve even got letters from minority shareholders at the Indus board (level) asking us why we aren’t recovering these dues and why we’ve been lax about it. Either this payment will have to be made or be scheduled to be paid. We don’t want to push Indus into a direction where they should take drastic action against Vi but money has to be recovered by Indus. It is a public company. It is a fiduciary duty of the Indus board and independent directors towards their shareholders to recover this money. They are working on it, but thankfully the dues are not rising anymore. Vi is paying its current dues to Indus.
Airtel’s RMS (revenue market share) is at a record 37.5%. What’s helping you hit these numbers?
Our underlying market share is even higher. We have gained 7-8% RMS in the last few quarters. That gain has come largely on account of losses of other operators because the market has not grown that much in the last 2-3 years. It’s due to superior execution, rolling out 4G in rural pockets where we didn’t exist, higher quality of network and customer service and the very solid (Airtel) brand which resonates with people. We’re happy that from a difficult situation the company was in 5-6 years back, it has now become pretty strong.
Should we expect further tariff hikes?
Some 6-7 years back, I had said the ideal ARPU is Rs 300. I didn’t realise it would take so long to get to Rs 200. But I can tell you that if India has to be supported by 2-3 telecom companies — it’s in the interest of everyone, including customers, that there is a viable, healthy telecom environment. That means companies must have enough money to build new networks. 5G has been a huge load on telcos without any revenue coming through. Airtel has spent around Rs 80,000 crore (almost $10 billion) on 5G spectrum and network in the last 18 months. I would tend to assume (Reliance) Jio has spent twice (our level) on spectrum and also on network, which means approx $25 billion have been invested which is getting no revenue. So, it can’t last like this. I would say, the sooner we get to an ARPU of Rs 250 and Rs 300, it will be better for the nation’s digital dream. A lot is riding on these telecom networks, the entire financial ecosystem, the DBT, government services. The whole digital public infrastructure (DPI) is banking on robust telecom infrastructure. That’s where the telecom department, Trai, stakeholders and investors must come together. The customer must also realise that “I’ve got to pay a few rupees extra to get a very high quality service, at by far the lowest tariff anywhere in the world”.
Are India’s telecom tariffs even cheaper than Africa?
Yes, we are cheaper than Africa. If we have to pay Rs 300 (a month), it’s basically Rs 10 a day. Now even for a common man, that’s okay — if he’s consuming 2GB of data a day, doing his business, his personal stuff, watching videos.
Digital and financial services are rising in prominence. How has Airtel performed in those areas?
I think we’ve done well, especially in cloud, in security and CPaaS, which is our communication services to enterprise businesses. Areas where we could have done better, and almost no one in the industry has done well, is music. But India doesn’t want to pay for music, they want free music. So Spotify has some small share, Amazon Prime has some, Apple has nothing. Wynk, we have a lot of customers, but they don’t pay. Same with JioSaavn, which hasn’t been able to monetise. So the specialised companies like YouTube are doing better. It (YouTube) is probably the most popular music app in the country, generating bulk of its revenue from advertising. We, on the other hand, follow a subscription model.
The telecom industry, including Airtel, has tried advertising. But I don’t think we have succeeded. But on the financial side, as in Airtel Payments Bank or Airtel Financial Services, that is picking up great momentum. We are doing financial inclusion. We have 16 million customers from the rural areas taking DBT, putting some deposits, making payments.
Are you thinking of listing Airtel’s financial services operation?
As per RBI regulations, you have to do it in some years. Let’s see how that goes. But eventually, we are obliged to do this.
Do you expect intense bidding in the next spectrum auction?
I think the spectrum for the main two operators (Jio and Airtel) and BSNL is pretty filled up. Even Vi has a lot of spectrum after the merger, more in some places than they need. So it will be some renewal spectrum, tiny bits for us. I don’t think it’ll be a big revenue event for the exchequer.
Is 5G too early in India?
It’s too early everywhere in the world but yet we have to do it. The good news is it creates a lot of capacity, which 4G could not have given us. Now both us and Jio have a buffer of capacity to take the next load of data consumption. It’s still a few years ahead of time but the world has moved on and India has to as well. India is proud to say it’s the fastest 5G rollout nation in the world.
Will operators charge more for 5G once AI, IoT apps arrive?
Those specialised applications like autonomous driving, robotics surgery, drone management…they will be there for enterprises, and won’t have any correlation with ARPUs. They’ll be more solutions-oriented. I don’t think we’ll (immediately) charge separately for 5G, we just need the data tariffs to go up.
Do you see data consumption dramatically rising?
Data consumption shoots when people go to 5G. It’s like a hose. If you have water flowing faster, you get used to it (and consume more).
Won’t that be a potential ARPU driver?
That too, but in general the pricing has to go up. We’ve tried to take it up as much as we could but we can’t do everything in isolation.
But with lower competition, your leeway might go up, right?
Competition is already as low as it can get. It’s not 12 operators like in the past.
So despite that, all of you are not really free to raise prices. Why is that?
Two things. One, we can only have a certain amount of premium. So the competition (Jio) also has to raise prices, which they haven’t done in a long time. Second, you have to see the market — what can it afford, which segments of the market can afford. Then there some customers who are using data far too much than they need to. That is not okay. Then if you start to charge a little more, then such consumption can be contained, network load would go down and spectrum utilisation will get better. But customers must be happy about the fact that in India, scale allows us to give low tariffs. If this was any other place where the population was less and consumption was lower too, this pricing instead of Rs 200 (per month) would have been Rs 2,000.
What’s the succession plan at Bharti?
You don’t need to even ask that question because (Airtel MD) Gopal Vittal runs this company, and somebody else will replace him at some point of time. Who replaces me is just a shareholder replacement — that’s an easy part. There is enough high-quality talent to run the company.
But will someone from the Bharti family side come in and play a more active role?
My son) Shravin (Mittal) looks after Africa, he’s on the board of Airtel Africa. He’s a lead member on the Eutelsat OneWeb board. He also runs his own tech fund. Kavin (Mittal, Sunil Mittal’s other son) is running his tech company. But Bharti is like an evolved, western public company, where it’s about meritocracy. My children are well-educated and well-trained. One day when they raise their hand, I’ll be delighted to get them involved. But I think I still have some energy to carry on.
