Invest & recover what’s lost: Bharti Airtel chairman Sunil Bharti Mittal to Vodafone Plc CEO Nick Read

Bharti Airtel chairman Sunil Bharti Mittal on Thursday said he spoke to Vodafone Plc CEO Nick Read, after the announcement on the relief package for the telecom sector, to convince him to invest in his company’s India operations now that the government has taken a major investor-friendly step. Mittal also told Read that the new reforms in the telecom sector announced by the government open up several opportunities for the two companies to partner in the areas of infrastructure.

“You have a lifetime opportunity to retake what has been a lost cause. The government has been very strong in their response and it is time for Vodafone and Mr Birla (KM Birla) to step up their contribution into the company. This was my conversation with Nick,” Mittal said, speaking to a group of journalists.

“If I was in their place, it would be an opportunity to retrieve the value back into the hands of the people who have invested large amounts of money. Vodafone has invested over $20 billion. Mr Birla would have also put in billions of dollars. This is really time for them to contribute their money, their resources, to revive the beleaguered company,” he added.

Mittal said he also plans to speak to Reliance Industries chairman Mukesh Ambani on the need for the industry to work unitedly so that it returns to fine health. He said the government has done its bit, which was historic and bold, and now the industry needs to do its part.

“There is a possibility for this industry to heal. This industry has seen too much bloodshed. I was happy to hear Mukesh Ambani say that it is time for the industry to come together and time for the industry to build connectivity and network for the digital vision of India. Responding to his statement, I would say time has come for all of us, the three plus one operators to close ranks and start together as team India for telecom and digital dream rather than being fierce competitor. While we will compete in the market place, we should build the ecosystem,” Mittal said.

Complimenting the government and the Prime Minister for taking such bold reform measures in the telecom sector, Mittal said investor confidence has returned and added that he sees no reason why Vodafone Idea should now not put in money into the company either through external investors or via equity by the promoters.

Going ahead, Mittal said the industry needs to see that the tariff is set right. He said that Airtel, which has in recent times raised tariffs at the entry level and for corporate customers, is going to take the lead in hikes in some other packs. “We can’t take the lead and raise across the board but will certainly do in some of the packs”, Mittal said. However, he added that he does not support any regulatory regime like a floor price to be introduced by the Telecom Regulatory Authority of India (Trai).

“I don’t favour any regulatory intervention by the government or Trai in tariffs. Tariffs have been under forbearance for long and that’s the way it should be. We have delivered under this regime and am sure will continue to do so,” Mittal said.

He said he’s sure that Airtel will reach an Arpu of Rs 200 by the end of this fiscal. “My desirable level is Rs 300 but a more realistic level is Rs 200,” Mittal said. Airtel’s Apru currently is Rs 146.

To a question that the industry doesn’t seem united on setting the tariffs right, which is also acting as a constraint for Airtel to raise it across the board, Mittal said sooner rather than later the industry will realise and move in the right direction. “We in our businesses need to be responsible. I will play my own part, others have to play their part. How long can you keep on having an industry with an unsustainable structure because you cannot keep going back to the government all the time. You have to help yourself,” he said.

Asked whether he’s disappointed that the telecom relief package did not reduce levies on the telecom sector like the licence fee or the GST rate, Mittal said he’s sure these would be dealt with in the second reforms package. “The telecom minister said that this is just the beginning and more would come. My guess is that the telecom ministry did what all was in its domain and now the finance ministry needs to take over,” he added.

On the four-year moratorium announced in the package, Mittal said the company will go for it as the cash flow it will release can be invested back into the network for 5G etc. “We will earn a cash flow of about Rs 35,000-40,000 crore. As a result, a lot of public market debt can be reduced. We will be able to invest the savings in cash flow into the industry and invest in technology. I can assure you the savings on the cash flow will not go into the dividend,” he said.

Regarding the clause that operators have the option to pay the deferred NPV amount in equity he said that on this option the matter would to the board. “We need to see whether this is an upfront equity conversion after four years or whether we will be able to do it every year. In the case of Airtel, the total amount of interest is Rs 7,500-10,000 crore,” he said.

According to Mittal, the government needs to explore other modes of spectrum pricing as the current one of having the last auction determined price as the reserve price for the next is faulty. Auction after auction, large swathes of spectrum go unsold because of the policy of basing the price of spectrum on the last auctions, he said.

“Spectrum should be priced appropriately for India. If you go back to 2010 auction of 3G and BWA, that was the starting point of the problem. Pricing went 5-6-7 times from the reserve price that became the bane of this industry as there were 6-7 players for three slots. Now whatever reserve price you put, spectrum will mostly go at that as there aren’t many competitors now,” Mittal said.