Over the past year, Bharti Airtel has witnessed significant growth in its Indian business, driven by data service uptake and a reduction in subscriber churn. In an interview with tele.net.in, Akhil Gupta, vice-chairman, Bharti Enterprises, and chairman, Bharti Infratel, talks about the major challenges facing the company, performance of its African business in the past one year and its regulatory and policy wish list for 2014…

What were Bharti Airtel’s key achievements in 2013?

In 2013, the company witnessed an improvement in its Indian operations, which was led by an increase in realised rates; data service growth, particularly 3G growth (in terms of both traffic and revenues); and rationalisation of sales and distribution costs with a reduction in acquisition costs as well as in subscriber churn.

Our Africa operations also stabilised during the year with gains in revenue market share in many countries. We made the first in-market acquisition in the company’s history by buying out Warid’s mobile operations in Uganda and followed it up with the acquisition of Warid’s assets in Congo B.

In addition, the company launched 3G services in Bangladesh. Marquee investors like Qatar Foundation Endowment made long-term strategic investments in Bharti Airtel and the company was ranked fourth among 100 emerging market multinational corporations by Transparency International.

What has been the response to the company’s long term evolution (LTE) services? What are its expansion plans on this front?

The LTE ecosystem in the country is still at a nascent stage and, therefore, service uptake has been limited. We expect to expedite roll-outs as the ecosystem matures further and more devices are available to drive these services.

What were the key challenges faced by the company during the year and how did it address these?

Uncertainty on the regulatory front and some instances of unwarranted penal action and tax demand on frivolous grounds (which many other corporates in the country also faced) were among the major challenges for the company. We continue to engage with all key stakeholders to resolve these issues.

How has the telecom landscape changed in the past year? What strategies have been adopted by Bharti to maintain its leading market position?

The phase of hyper competition and irrational pricing seems to be behind us. We have maintained our leadership position by improving our realised rates on the strength of better networks (especially our 3G networks) and customer services, as well as superior products, particularly on the data side.

What are the expected tariff trends in the voice and data segments?

Clearly, the data segment will drive sector growth as operators roll out 3G/4G networks in the country and the device ecosystem matures further. Also, the realised voice rates need to increase gradually over the next few quarters to ensure sector growth. This may not require any big escalation in tariffs but should be achieved by reducing unsustainable discounts and promotional schemes. Data rates are very reasonable and appear sustainable at current levels.

What is the future outlook for data services in the country? What proportion of the company’s revenues are you targeting from this segment?

Like in other parts of the world, India has witnessed a significant increase in data traffic and revenues. Data volumes are growing at well over 100 per cent year on year. We expect this growth to continue and sustain as more 3G networks are rolled out in existing coverage areas and new coverage areas. We are monitoring this growth and making large investments to unlock this potential and provide customers internet access on their mobile handsets. We would aim to achieve high growth in data revenues and not worry about its proportion in total revenue.

What would be the impact of the draft merger and acquisition (M&A) guidelines on the sector? What are the company’s plans for inorganic growth?

We would wait for the final M&A guidelines to explore possibilities in this regard. It is, of course, quite clear that unless a uniform spectrum usage charge regime is introduced, there would not be any incentive for an existing player to acquire another operation.

How has been the performance of the company’s African business in the past one year? What are the future investment plans for this market?

Our African operations have stabilised and we witnessed steady growth in our revenues and revenue market shares in 2013. Besides the voice segment, Africa is witnessing growth in the data segment with traffic doubling on a year-on-year basis. We continue to invest more capex in Africa, particularly in 3G and Airtel Money. We look forward to the African business moving steadily towards the major milestone of achieving free cash flow in 2014-15.

What is investors’ perception of the Indian telecom market and how is it likely to change in the coming years?

After a long time, the Indian telecom market is looking very promising to operators, investors and other industry stakeholders. However, what would be important for tapping this potential is continued improvement in the voice realised rates over the next six to eight quarters as the sector needs to be financially stronger. Without this, the large investments that are required for data networks will not be possible.

What is the company’s policy and regulatory wish list for 2014?

Our policy remains to invest in providing mobile internet access to the masses while improving voice service availability in the country. We wish that in 2014 the Indian telecom sector gets rid of the numerous regulatory uncertainties in a non-discriminatory manner with the creation of a level playing field for all and the fundamental aim of ensuring a financially healthy sector so that requisite investments can be made by operators. The sector must also settle the large number of litigations between the operators and the government. The industry and the Department of Telecommunications must take a pragmatic approach to settle all the issues amicably and, preferably, out of court. For this, it is imperative that as a first step, all issues involving technicalities or hyper legal interpretations are dropped or compounded with token settlement amounts.