'I think we have lot to offer to RIL, but I don't think it includes finance...'

Ben Verwaayen, CEO, Alcatel Lucent is a regular visitor to India and this time he was here for the India Economic Summit in Mumbai where he was focusing on leveraging ICT for financial inclusion, healthcare delivery, education, and environment sustainability.

Ben has been instrumental in transforming BT where he worked for 6 years. He also worked for Lucent Technologies where he held various positions. Prior to joining Lucent, Ben Verwaayen worked for KPN in the Netherlands for 9 years as president and managing director of its subsidiary PTT Telecom. From 1975 to 1988, he also worked at ITT in Europe.

In an exclusive interview with VOICE&DATA during the India Economic Summit, Ben spoke on key learnings of the summit, joint initiative with Reliance Industries, TDD-LTE ecosystem, Bell Labs innovation, India manufacturing, and NBBN. Excerpts-

Alcatel Lucent has been appointed to chair WEF Global ICT Council and the focus is on leveraging ICT benefits for financial inclusion, healthcare delivery, education, and environment sustainability. How do you see it unveiling over the years?

We are living in a connected world and have around 7 bn people in the world. We are very quickly going for more connectivity than number of people in the world but still a lot of people have not been connected. Approximately 2 bn people are still not connected but I am sure they will be connected in a couple of years.

We have a platform that gives the opportunity to have economic and social inclusion and I think that is going to be the backbone of the growth of the economy going forward. So from that respect, I think that the work that this industry is doing is a supporting role. It supports the real economy to flourish whether you talk about technology in agriculture, technology in social services, or technology in innovation. All those elements are contributors to the economy and social welfare of the nations and the people. If you build the infrastructure right now, it is not an aim in itself but it is an aim based on a vision of connected world and it has a number of consequences. First consequence is that the people are informed 24x7, 7 days a week and that is a different world as feedback is instant. That's the world where the power of authority is very different from what was there in the past. Second, economies are connected, so if one economy is going well it spills over and if it is not going so well then it also spills over. Third, things that you can do for people is increasingly important and visible and what I mean by that is you can bring social services like health, education, corporate governance, and transparency.

What was your key learning from the India Economic Summit 2011?

I have 2 key learnings. First, India, as President Obama said, is no longer emerging but has emerged. So it is a superpower but it is uncomfortable with the role of a superpower and does not know how to deal with it. It is great to have that capability but you learn everything over time. So it is very early days but rest of the world has high expectations. So what I learned in the first day is the difference between aspirations and expectations. Aspirations you grow and expectations you meet and I think India is still in the learning curve. Second, there is a lot of optimism as there is the highest smile per capita in the world that you can see here and that is an inspiration.

Are you in line to achieve adjusted operating margin of 5% of 2011 sales...a lot of critics are saying you will be short by 1%?

You don't have to be a critic to say that we will not make 5% since we have said it ourselves. We will not make 5% and when we gave a profit adjustment at Q3 results we said 5 will be 4. This is by itself not the biggest surprise as we are depending upon the markets as they are. Especially in Europe, there is some hesitation in the market that translates very much where people spend their money. Most people spend their money in the mobility sector. We are very strong in mobility in the US, China, and some of the other markets but not so much in Europe therefore we are particularly hit in terms of capacity, IP, and optical which can be postponed a little bit longer. And that's what we see happening in the European market. And that's not the reason why market was slightly disappointed about our performance but it is much more to do with our ability to generate profit and our profit this year is 100% better or more than the last year. Profitwise we did well but the problem is cash. The market was disappointed at the conversion of our profits into free cash flow.

You have a joint initiative with Reliance Industries headed by Kenneth Frank. What is this joint initiative all about and how do you plan to move ahead with respect to RIL's broadband plans?

We have been asked to come and help to a certain extent and we are more than happy to do that. It means that we will bring the expertise-Bell Labs and product house. It is based on the best-in-class performance and absolutely no preference for any brand of equipment that needs to be made so they are absolutely neutral from that perspective. It is a kind of interesting next model that you can find in the industry that is looking to various ways to do 2 things. First of all, get knowledge merged with other pockets of knowledge. So in this particular case, knowledge of operator, knowledge of a technology company like us, and knowledge of application because at the end of the day application is going to sell and if you organize it differently than just vendor relationship, you probably have an interesting mix to do things faster and better.

When RIL started CDMA services in the country, Qualcomm acted as a consultant and had a small investment in the company. Are you planning to do the same for RIL venture?

I think we have a lot to offer to RIL but I don't think what we have to offer includes finance, nor do I think they need it.

Sometimes we feel India made a big mistake by opting for 2.3 GHz as the ecosystem is not in place even after 2 years. Had India opted for 700 MHz, we would have gained from the US players' expertise and also benefited in terms of price. What is your take on this development?

This is pure speculation. It is not helpful for anybody as we work with decisions. We work with scenarios and this is the reality on the ground. We think TDD-LTE is a full service standard in both India and China and will ensure that you have a full service capability including the ecosystem. It is a decision, and I take decisions as they are.

Spectrum is not just a telecom issue but it is also a government issue. It is a scarce resource and spectrum decisions are taken with many more considerations rather than simply timing to get TDD-LTE rollout.

In India, Alcatel Lucent is at the bottom of the table of network infrastructure players as per VOICE&DATA. How do you plan to move up?

Depends on what price you want to pay to move up the ladder. This is a classical story in India being there for a long time. You have around 1.1 bn people therefore there is a great promise for the future. And because of the great promise for the future, you have to except certain terms and conditions and pricing in today's reality.

I think we are much more focusing on India on 2 fronts. One as a market

it has to be able to be profitable and that's where you need to be selective

in what you play and how you play and may be as a consequence I am not in your list, so that's perfectly fine and I do not have any problems with that. We don't want to be a commodity player and we stand for innovation as we have strength in IP and optics and we play to our strengths.

Bell Labs has a facility in India. What innovation is this facility presently focusing on for emerging market?

Bell Labs in India is focused on developing innovations not only for India but for the emerging markets. They are developing on green technologies for reducing power consumption. The R&D facility in Bengaluru focuses on the critical products in IP applications.

In the old days, you would take

a geography and say you would do R&D in that geography and that's not

we do nowadays. We have a global linked infrastructure and so what we do here matters not just for India but for the whole world. If you look at what we do for green touch that is what

we do collectively for our whole portfolio and also for our partners and

our competitors.

Huawei is investing in the enterprise market but you are planning to divest in Genesys. What is the logic?

I do not make any connections between those two lines. Every company makes its own strategy. We have looked at our business and where we need to invest in and where we make our differentiation. Genesys is a world class company and it deals with call center software but it is a very specific segment and a very successful one. We have decided that we will double our strengths in the core network and telecom network plus the enterprise part. So we have decided to keep our enterprise business which is more generic in nature and to divest from sector specific type of activity

in Genesys.

Huawei is planning to invest in a manufacturing facility in Gujarat. How will you compete with them when they have already beaten you in cost?

With all the respect, I see a movie of 1960 to 1980 coming back. At that point of time, people would run around the world and commit factories and those factories would all be local manufacturing places. We came to the conclusion that this is very inefficient and does not add value, so one needs to globalize factories. In our sector, manufacturing becomes a fraction of the total value. Ninety percent of all the added value is in system integration, system testing, and software development. So I don't understand why all of a sudden there is a fascination for manufacturing in telecom. Somebody must have put a wrong reel in the movie. People would say we are interested in local knowledge, system integration capacity, and professional services capacity.

You have helped BT in the transformation process. What is your advice for the BSNL transformation? What is your comment on NBBN being laid by BSNL and other partners?

They know exactly what to do like anybody else-if you want to transform your business model because that's what it is. It is the transformation of a business model and it has a big impact on how you run your business, what is the knowledge base of your business, and how you

get rewarded.

I am not in the advisory business and I am not a consultant, let me say that upfront. What I think and what we see happening in the world, let me put it slightly differently. Smart broadband capacity is truly important because we will go to the next phase of communication which will not be around the next phase of information or web experience but immersive communication and that will require a backbone facility which is much more powerful than what we have today. odels vary from place to place and government decides whether to own it, incentivize it, or go and build it. Whatever model you chose, you need to realize that if you need to go over and beyond a certain level of capacity, you need to build smart broadband and this will be completely different from the model that we had for voice. It is a strategic investment any country in the world has to make and you have to find a model and you have to do it.

Do you see a scope for further consolidation in the network infrastructure market worldwide?

I don't think the issue is about further consolidation which would imply that real issue is size. The focus is on 2 things-mix of products that you have-edge, IP, switching, fixed, or mobile and the second issue is about geography. So in our sector if you want to know the health of the company, you need to know what and where are you selling and second thing is what are you selling and to which segment of the market. And if you look to those, there are significant differences given the part of the market you are talking about. If you talk about the mobility market, especially high volume there means very low price. If you talk about the core capabilities of networks, there you have much better margins because you talk about much higher concentration of technology and innovations.