1991 Budget speech was Freedom Day for us; whole world was open: Mittal

Sunil Bharti Mittal says the 1991 reforms transformed India's business landscape, paving the way for Airtel, and calls for continued reforms to sustain growth

Sunil Bharti Mittal, founder and chairman of Bharti Enterprises, is the poster child of India’s reforms story. The easing of controls in the telecom sector starting in 1992 paved the way for the emergence of Airtel, now India’s second largest mobile network, which serves over 480 million subscribers in India and has operations abroad too. In an interview with Gulveen Aulakh, Mittal discusses the transformation brought about by the 1991 reforms and the measures now required to boost India’s growth. Edited excerpts:

 

How were things looking for your business around 1989-91, and how did the reforms of 1991 change the scenario and your outlook? 

Back then, every year you would hold your breath when the export-import (Exim) policy came out. What was going to be allowed? What was going to be banned? It used to be a big event, just like the Budget. 

I used to spend a lot of time in government corridors because I was dependent on imports like components for telephones, which were very restricted, and there were countless forms… nothing came easily. It meant filing applications, sucking up to officials, explaining what you need to them. It was a pretty tough time. 

The Directorate General of Technical Development (DGTD) was the other entity that had control over telephone licensing back then. I still recall I was at the DGTD office when it was abolished. We couldn’t believe it! You could import whatever you wanted, it was incredible. People like us, who were young, bubbling with energy, wanted to do new things fast. I still remember then Finance Minister Manmohan Singh’s Budget speech, it was like Freedom Day for us. 

There were quite a few industrialists, the so-called Bombay Club, that opposed the reforms vociferously at the time... 

Though I was very small in terms of my position or status, I was vocal against the Bombay Club (of industrialists who opposed liberalisation). You could clearly see that these people, who already were big industrialists, were trying to hold on to their turf. 

In fact, that was precisely what I was trying to escape in my early days. I was in Ludhiana making bicycle parts, then hosiery yarn. I realised in about three to four years that I would always be a small supplier to some of these people because they would never let you grow. You had to break free from the established businesses into something new. That meant new licences, partnerships, and not doing what India was already doing. It also meant navigating the import policy and regulation, which required either luck or complete freedom. But it was hard to get lucky, every time. 

We used to watch out for the Open General Licensing (OGL) list because that was the path to freedom. It was a small list, and then suddenly somebody tells you the whole world is OGL… that was a huge thing.

 

And this was a time when they also controlled the amount you would produce…

 

Yes. When the DGTD gave us the cordless licence, it specified that you could manufacture up to Rs 2 crore in revenue in a year, not how many pieces you could manufacture. Everything was controlled. The Monopolies and Restrictive Trade Practices Act was another overhang. You couldn’t get bigger; everybody had to remain small. Scale was not seen as a virtue, and if it had to be there, it had to be in the public sector.

 

Our struggle back then was to produce more while keeping the value low. That was a time when there was under-invoicing. You invoice for, say, 20,000 cordless phones, but import 30,000 at the same value because you could produce more. People knew how to game the system.

 

Such policies only hold countries back, make them small, and that was the crisis we saw in 1991.

 

And when liberalisation was announced…

 

It was my ticket to heaven. By that time, I had mastered the import policy. I was so good with it that I knew that I would be significantly superior to many others. I had already established links in Japan, Taiwan, and I knew the pockets where production would be required for India. I was ready. Just imagine the situation: You’ve got the muscle, you’re ready, but you’re shackled, and suddenly they say, all right, go! It was like that. 

 

How did things play out between 1991 and 2001?

 

In 1992, applications were invited for mobile network licences, which was transformative for me. I was already making phones, answering machines, and cordless phones. It was my area of interest and no big enterprise was in that business at that time. We saw an opportunity that few others did. There were 30 applications, 14 got shortlisted, including us, and we finally got through. Then the Tatas took us to court… It took us two to three years before we could finally launch.

 

We were still running Beetel and other businesses, but I handed it over to Rakesh and Rajan [his brothers], and I completely moved to mobile.

 

It was the National Telecom Policy of 1999 brought out during Atal Bihar Vajpayee’s tenure that opened up the whole country. We participated in that, but didn’t do well. Some overpaid at that time and fell by the wayside, and we started to buy them out one by one. We expanded into South India first, with JT Mobile—Karnataka, Andhra Pradesh—and then acquired a majority stake in SkyCell and entered Chennai. That was followed by Spice Cell to enter Kolkata and then a lot of new licences. So, if the reforms of 1991 wouldn’t have happened, then the licensing of 1992 wouldn’t have happened.

 

What was your business strategy at that time?

 

We have always been cautious about how much we commit. Our bets are measured. Some people now see Bharti as a large company, but it’s been built in increments because we never had the resources. We were not as bold as, say, Masayoshi Son, who bets the house again and again. We were always really careful. We do take a lot of risks, but it’s not aar-ya-paar (do or die).

 

Initially, we called our strategy ‘Bell North’, to be a North India player. Delhi was our centrepiece. We bid for Delhi in the network licence auction, it was the most aggressive bid, but we were so good that we got Bombay too. But after the court case, we stuck to just Delhi, and we were very happy about it. It turned out to be better for us actually. Akhil Gupta, who joined me at that time, said, “I guarantee you that Delhi will do better than Bombay (now Mumbai),” because it had more vehicles than Chennai, Kolkata and Mumbai put together. And that’s how it turned out.

 

However, once we bought JT Mobile in the South, our ‘Bell North’ strategy went for a toss. We then took a licence for fixed line in Madhya Pradesh, and then we were on a roll. And then in 2001-02 we were bold, we bid for nine mobile network licences, seven fixed line ones, long distance, international long distance, all in one go. I still remember, for two years, our machine was creaking. It was very difficult, but we stabilised it.

 

How did the access to resources change after the financial markets opened up?

 

We conducted our initial public offering (IPO) in 2002 and raised Rs 850 crore, which was a lot of money at that time. We just barely scraped through. But that money helped. And then we raised money from Singtel and Warburg Pincus. At one point, Singtel, Warburg, IFC and others gave us $700-800 million to roll up all the mobile network circles, which helped a lot. Actually, I have been quite fortunate in being able to raise money easily, even in difficult times.

 

How do you feel about the telecom sector’s evolution since the 2000s?

 

I think it is the backbone of India now. It is now fundamental to the economy, to the well-being of this country. Without this digital highway, we could not have grown at the pace we have. The entire delivery mechanism of government services — whether it’s the direct benefits transfers, unified payments interface — would not have been possible without that infrastructure. But you only remember us now when your call drops, or your network does not give you the desired speed.

 

Do you think the churn we saw in the sector, including a few scams, made the sector more resilient?

 

Scale is important for this business, and it comes from two factors: You must either have an average revenue per user (ARPU) of $40-50, which allows you to serve 10-20 million customers and achieve the desired outcome, or if the ARPU is $2-3 you need 200-300 million customers. That’s where India is. We have been fortunate that India provides scale, allowing for extremely low tariffs. But if there were 10 or 11 operators today, everybody would be struggling, and nobody would have invested.

 

I would say having 11 or 12 operators was a policy flaw. We know where it came from — the infamous 2G spectrum scam. That was not done to increase competition, it was to line up somebody.

 

As a veteran, what would you say India should focus on building now? Some would say that a lot of our growth is still coming in an unequal way…

 

I think it’s a natural phenomenon. Even in countries like China that have grown rich in the last 20 to 30 years, it takes time to overcome these disparities. I’m not saying we should be proponents of the trickle-down theory, because people don’t have patience anymore. I would commend the current government, they’re conscious of the fact that India’s young population is very large, restive and ambitious, and that they need to create opportunities. A lot of work has been done. For instance, once they recognised that manufacturing would create more jobs, they brought in the production linked incentive scheme. Our global capability centres (GCCs) have also flourished and created a lot of employment.

 

A lot of good work has been done in the past 10 years, and you have to credit the government for this. Prime Minister Narendra Modi’s vision of making India a rich country is working. But it takes time. We’ve seen a lot of momentum in the past 10 years, and even if we grow at 6-7 per cent in the next 10 years, it’s going to create a big difference.

 

Do we need more reforms?

 

More reforms are always welcome. You can still put together a book on things to be taken care of. There are bureaucratic changes that are still required. But the signs are good. The regulators are responding quickly, there’s a sense of urgency. They want to assist, especially if it means getting more investments.

 

Is there anything else you would like to add on the 35-year reforms journey?

 

I would say 1991 was an exceptional period in Indian history. A big 400-volt shock was administered to the system, which was required. Today, we are in a much, much better position. At all international fora you can see the respect that India commands. That comes because of the size of our economy, of the market. We don’t need a big shock now, but some changes are certainly required. I’m glad that the PM is acutely aware of it. They have set up committees to improve the ease of doing business. These are good initiatives that will produce results because they know the PM wants to see results. This is the time for the industry chambers to become hyperactive in producing papers and seeing what can be done, because the government is willing to review them.

 

What is your advice for budding entrepreneurs? 

First of all, there’s never been a better time. In our times, you couldn’t raise capital, even on projects or hardcore assets. Today, you can raise money on ideas. That, to my mind, plays naturally to Indians’ advantage because we have tremendous ideas and a lot of energy. Then, you stay the course – you pick up something, go with it, and don’t get carried away. I always say, being successful is tough, but managing success is even tougher. When I see younger, successful Indian entrepreneurs suddenly wanting to go to Australia or the United States, buying hotels… This is the stuff that Indian entrepreneurs must avoid. We have a large population of nearly 1.5 billion here, scale up here, like with Airtel, and then go elsewhere. Keep your feet on the ground, be rooted first, get to scale, get to some real business and then start to fly. The problem is most of the people start to fly too early.