Few Indian businessmen have lived with so many global business partners as Sunil Mittal, the chairman of the Bharti Group. While Singtel and Vodafone are his partners in telecom, Wal-Mart is with him in retail, Rothschild in farming and Axa in insurance.
In an interview with Surajeet Das Gupta, Mittal, who won the 2006 BS 1000 CEO of the year award, talks of the road ahead for his group. Excerpts:
Where do you see the Bharti Group in the next three to four years?
A year ago, we had articulated that we would be a $10-billion group by 2010. A large part of this will come from telecom and other businesses too would have kicked in by then. But it is possible that this number may be achieved by telecom alone. By 2010, we will be one of the leading players in insurance, and retail could also become a big contributor to our topline.
In India, hypermarkets outside the cities do not work. The marketplace is still dominated by small-format kirana shops. Where does Wal-Mart fit in?
Wal-Mart does small formats in Japan and Mexico. In the US, it has only large formats. We are clear that we will do multi-formats, but big-box strategy will be a thrust area.
With many of the existing large retailers occupying premium commercial space, do you see problems in acquiring quality space?
If you look at the Rahejas, Pantaloon or RPG, how much space have they acquired? Nobody has even scratched the surface. Sure, the prices are high, and they have to be closely watched, but there is no dearth of availability.
Everyone thought you would tie up with Tesco, so what happened?
We were a partner of choice for many retailers worldwide and it is true that we were in discussions with Tesco for a long period. But we needed a partner with similar ambitions in India as far as speed, scale and size of operations are concerned, and Wal-Mart scored fairly high on these parameters.
There is a growing fear that big foreign retailers would destroy the mom and pop stores. Is the fear real?
Whether Wal-Mart comes or not, those who are inefficient would go away. Our research shows that the younger generation in families that own small shops are less inclined to run them - they are more educated.
So a large number of such shops will close down. Also, rentals are rising sharply, so renting the shop out would be more profitable than running it. Surely, there will be those who would face the impact of organised retail, whether Indian or foreign.
My estimate is that if in the next 10 years, India reaches a retail trade level of $500 billion, not more than $50-75 billion would come to the organised sector. So all such fears are baseless. In fact, organised retail will generate a large number of jobs, some of which would go to the children of such shopkeepers.
Does the possible buying of Hutchison-Essar by Reliance or Vodafone pose a challenge? If the Reliance deal gets through, you may lose the No. 1 mobile operator status in the country...
These are not challenges, but just events. If Reliance wants to pay a large amount of money to aggregate its market share, that's fine. It may pay $15-18 billion, but this should make business sense. The pressure is on the side which makes the acquisition. Our cost per minute is the lowest, we are the leader and are adding numbers. If Vodafone wants to come, it is fine - Hutch is a strong competitor. I don't see any other competition as strong as Hutch.
Why are you not in the race?
It is too expensive.
With Vodafone in the race for Hutchison-Essar, what happens to your relationship with it? After all, it has a 10 per cent stake in Airtel. Do you feel slighted?
Not at all. Vodafone and we are talking all the time. It has its aspiration in India. Our relationships with our partners are legendary. And once Vodafone takes a decision, we will start discussions on disengagement. I can tell you it will be in a very happy and amicable atmosphere.
Is it true that you were not willing to give Vodafone a larger stake?
There is no question of willing, it only chose to take a 10 per cent stake. It was very clear that the other stake lies in the public market, which we would not disturb, and Bharti would not sell more because we need an Indian partner and we had no intention to dilute ourselves. Whether Vodafone had any desire to buy the Singtel stake was never
expressed to us.
Vodafone also wanted to test developing markets - even at that time, it could have bought Li Ka-Shing's equity in Hutchison-Essar. In the Bharti system, there is zero stress on this issue.
Did Vodafone approach you to bid together for Hutchison-Essar?
No, but in the past, the question of whether Bharti should acquire Hutch has come up during board meetings several times. But we made it clear that we were not keen. The key to the sale are the Ruias.
The question of our involvement never arose because the Ruias have to decide on what to do. If the Ruias have the intention of staying in the race, there is no question of any Indian company buying it. To be fair, we never even tested this as the Ruias have not made up their mind.
Is the 3G dream over? Is there a market for it in India at all?
3G is not as hot as it was a few years ago - there are no killer applications that have come up. India will use 3G in a different manner. India is spectrum-starved, so 3G gives the much-needed relief by delivering better quality basic services.
Second, 3G will play a vital role in rural areas. Since it is impossible to deliver broadband through copper or fibre there, 3G will help deliver these services in rural India.
For pure data usage, there would be a few million customers to begin with - then we don't know where it goes. Handset prices for 3G are dropping. Worldwide, 3G is picking up, but not the way one would want it to.
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