BHARTI: Gearing up for level 2

Sunil
Bharti Mittal could not have asked more for Bharti Tele-Ventures in the
financial year 2004—05, except spectrum for the current as well as 3G
services. Be it subscriber growth, pan-India coverage, performance on the stock
market or expansion of network-everything seemed to be on track for the
company. The Bharti scrip showed a remarkable jump from Rs 124 to Rs 241 in 52
weeks. Riding high, Mittal sold his entire personal stock, accounting for about
0.15 percent stake in the company, for a consideration of over Rs 60 crore in
March 2005. Earlier, Warburg Pincus sold over six percent equity stake in Bharti
Tele-Ventures for nearly Rs 2,500 crore, making almost four times profit on its
investments.

Perhaps the biggest achievement of Bharti Tele-Ventures last year was the
expansion of its services in all the 23 circles, making it the only private
mobile operator to have on all-India presence with 10,000 base stations put up
in the last 10 years. Bharti now plans to add another 10,000 base stations to
fuel its expansion both in cities and rural areas this year.

The mobile subscriber base of the company, as on 31 March 2005, stood at
10,984,280, a growth of almost 69 percent year-on-year. This gave Bharti a
market share of almost 21 percent in the wireless space. And among the GSM
operators it occupied almost 27 percent of the pie. This year the firm has
managed to bring down its prepaid customer base to 76 percent, as compared to79
percent in FY 2003—04. Though Bharti's officials skirt questions on falling
ARPU and say that in a hyper-growth market subscriber growth matters more; the
fact remains that for mobile services, its ARPU came down from Rs 532 in FY 2003—04
to Rs 504 in FY 2004—05. However, the good news was that average minutes of
usage per user went up from 300 minutes to 357 minutes in the same period.

Bharti Tele-Ventures is on its way to becoming a $2 billion company. The
consolidated revenue for FY 2004—05 was over Rs 8,034.6 crore, up 61 percent
from Rs 5,002.5 crore in FY 2003—04. The mobile services contributed Rs
5,435.60 crore, broadband and telephone services Rs 1,127 crore, long distance
1,866.10 crore, and the enterprise business brought in Rs 538.10 crore.

In the FY 2004—05, Bharti consolidated its enterprise service portfolio
with the acquisition of Comsat Max and C Max Infocom for Rs 33 crore. This gave
Bharti a lead in the financial and banking segment, where Comsat had a strong
VSAT presence.

With Reliance and BSNL pursuing aggressive plans in mobile and broadband
businesses, and others also expanding their network, maintaining a strong growth
rate would be an uphill task for Bharti, particularly when the next phase of
expansion is in even lower ARPU areas. The financial year 2005-06 would see
concrete plans for 3G being brought to the fore. The company has time and again
made clear its desire for starting 3G services as soon as spectrum is released.
This year, Bharti would strive to increase its non-voice revenue while pushing
up its ARPU and minutes usage. And with 3G services, we might see an improvement
in quality of voice services, and better data revenues.

"ARPU has lost the kind of relevance it had earlier"

Bharti has reached the 10 million customers milestone. What is your next
target?

The vision is to create a globally admired company. We'll focus on
delivering high-quality customer services, employee empowerment and leadership
development, innovative products and services, operational efficiency, and
building a powerful brand.

Bharti has done well on the numbers front but a lot needs to be done on
quality of service. What steps has Bharti taken for improving QoS in the future?

We have consistently done well on all service parameters including QoS. Our
performance has been well recognized, nationally and internationally, at various
fora. We have won a series of awards in the last 12 months, each recognizing
Bharti's superior service and performance.

As per a Goldman Sachs report, Bharti's weighted average ARPU is 13
percent less than Hutch. Being a leader, how do you plan to bridge the gap?

In a low penetration, mass market like India, ARPU has lost the kind of
relevance it had earlier. Today, leadership is to be seen in terms of total
revenues, operating efficiency, and capital productivity.

Indian service providers have been talking about connecting over 6,000
cities. What are your plans for connecting new towns and cities?

Bharti is the only telecom company with presence in all the 23 circles of the
country. We are currently operational in more than 2,700 towns with over 10,000
cell sites. We plan to add another 10,000 cell sites and expand to 5,200 plus
towns.

Bharti looks weak on consumer broadband services. What is the strategy
that Bharti has devised to cater to broadband-the next big revolution in
Indian telecom?

Bharti was one of the first companies to recognize the potential of broadband
services like DSL. Today, we have around 150,000 DSL customers. In the current
fiscal, we plan to roll out broadband and telephone services in the top 50 towns
of the country.

In the mobile space, everybody is talking about 3G services. What is Bharti's
strategy here and what is likely to be the expected market size of the 3G
services?

We believe that 3G will be here in the next 18—24 months. We estimate that
about 10—15 percent of Indian customers in the next 24 months will be using 3G
services.

The next phase of growth in mobile and broadband will come from content
services (like entertainment). How is Bharti gearing up for content services?

Bharti has always been the first to bring unique and innovative services to
India. Airtel was the first mobile service in the world to screen a full-length
movie on mobile phones. Airtel Live (a multi-access entertainment portal);
Airtel portfolio manager and stock ticker services in association with the
Bombay Stock Exchange, Hello Tunes, and BlackBerry are just some examples that
illustrate our commitment to innovation.