Manoj Kohli: wants to make Bharti Airtel the Toyota of
I meet Manoj Kohli at his office in New Delhi's spanking new
business district. It's a wintry February afternoon in the
Indian capital city's suburb of Gurgaon, and there's dust in
Giant glass towers and sprawling malls dot the dry landscape,
and cranes and construction are everywhere. Gurgaon, like much
of urban India, is expanding — and expanding fast. So
much so that the new Gurgaon-Delhi expressway is already
It's a congestion that extends to the country's airwaves as
well, as the growing telecom industry here faces its biggest
resource crunch ever — that of spectrum.
For Bharti Airtel, India's largest mobile operator with
revenues last year of $4 billion, this constraint could be
critical. Indeed the last few months have seen the stocks of
telecom majors, hitherto the darlings of India's stock market;
take a beating in valuations on account of uncertainties of
I ask Bharti Airtel's president and CEO how big this problem
really is. Kohli, flush from the awards at Barcelona's Mobile
World Congress, is ebullient about the group's growth
Barcelona was also the setting for an important Airtel
announcement: it now has 60 million subscribers.
Kohli says Airtel doesn't intend to slow down. "We want to give
dial tone to 1.2 billion people," he declares. Sitting in his
fourth-floor office at Unitech Park, surrounded by colourful
posters of ad campaigns and red-and-white strategy statements,
Kohli radiates a cool confidence.
He smiles when I refer to the telecom majors' battles over
bandwidth as the Spectrum Wars. "It is a bit of a dichotomy,"
he admits. "On one hand the spectrum available is low. On the
other hand, our market growth is the highest," he says.
"The average spectrum available to a telco across the world is
17 megahertz. Of this the majority — 10-15 megahertz
— is allotted at the time of getting a licence."
In India it is different, he says. "We start with 4.4
megahertz. Then we get another two. Then we get another two,
and so on."
New telecom licensees
But the matter is with the courts, he concludes. They will
decide exactly how the government must allocate additional
spectrum between existing players and also to a flush of new
entrants that were awarded telecom licences earlier this
And in the interim? Will a shortage of bandwidth affect
Airtel's 50%-plus annual rate of growth?
Kohli says no, and explains why not. The answer lies in two
magic words, he says — words long chased by marketers
of products as varied as shampoo and SIM cards: rural
That's where the future market is, says Kohli, who spends long
hours every month traversing these remote areas in an
This 48-year-old CEO recounts stories of meetings over steaming
sweet tea and fried dumplings with village elders and with the
kids — "They're our future market," he says.
And the results of this research? "It's amazing what kind of
feedback I get," he says. On one such recent tour in the state
of Gujarat in western India, Kohli was taken to a village
"There were five men who lived there, immigrant labourers from
the state of Bihar. They shared one phone between them. Each
week one person recharged the phone by 50 rupees." This is
equivalent to $1.25. "But in that half hour I spent with them I
got so much feedback," he says.
Fortune, Kohli maintains, for Airtel at least, is clearly at
the bottom of the pyramid.
Fall in average revenue
But what about the declining average revenues that come with
expansion into these rural markets? How does Airtel propose to
service such low value-added customers and still maintain its
current 40%-plus ebitda margins?
The answer to this query maybe radical, but it's quite simple.
Kohli rejects the ARPU — average revenue per user
"Traditional ARPU models are meant for western markets," he
says. "Those markets actually have ARPUs of $60 and $80 and
they are pricing calls at 20-25 cents a minute. Our pricing is
about less than two cents a minute. We need to have a new
So we turn to page 31 of Airtel's quarterly report to study the
new paradigm — the three-line graph that tracks
absolute revenues, operating expenses productivity and capital
It's an approach that seems to make sense in a market where
ARPUs are headed downwards, believes Kohli. The going-rural
strategy means every new chunk of customers has a lower ARPU
than the last set of customers.
Nevertheless as Kohli points out, rural markets with their low
penetration rates are clearly where Bharti Airtel wants to
With network coverage of 320,000 villages, Airtel is still
behind state telecom giant BSNL, which covers 550,000
Intensity of growth
But Kohli declares that Airtel is moving ahead and speedily.
"In the last two to three years we have overtaken BSNL in
coverage as well as quality of coverage — because our
intensity of growth and roll-out has been much faster."
The village strategy here is four-pronged — good
network coverage, good distribution, good service —
including training of retailers — and good branding.
He characterises his distribution policy to a "matchbox
distribution strategy". What does that mean? "Wherever boxes of
matches are sold, Airtel will be there," he says.
Airtel is serious about positioning. Its mission statement sets
itself the goal of becoming, by 2010, India's most favoured
"We can't just be a telecom brand," says Kohli. "We also have
to be a media brand and an entertainment brand." He explains
the company's decision to participate in the niche IPTV market
as well as the mass direct to home satellite market.
"For an Indian consumer there is propensity to talk and there
is a need for entertainment on a mass scale as well," Kohli
explains. Direct-to-home satellite TV will be launched in the
first quarter of the financial year, he says.
The 3G mobile policy announcements are still months away, but
the next year will also probably see a flush of new telecom
licensees. Will this intensify competition? Kohli is
Building new towers
Of the existing operators, Airtel has been expanding at an
ambitious rate, he says. Essential infrastructure such as
towers is keeping up. "In the 30 minutes you've been here"
Kohli tells me, "two or three new Airtel towers have gone up,
in different areas across the country."
The new players themselves, Kohli feels, "will definitely have
serious viability issues." So will Airtel, with its healthy
debt-equity ratios, be raising debt and acquiring such players?
"There may be consolidation opportunities in a few years,"
And in the mean time measures such as number portability will
work to Airtel's advantage, Kohli confidently points out.
"There are number of customers locked into CDMA who want to
switch over to Airtel," he predicts.
We speak about Sunil Mittal, the visionary founder of the
Bharti Group. Mittal began life as a small-time bicycle parts
manufacturer in the northern state of Punjab and now presides
over a vast business empire.
The two men are close. "We worked together when the industry
was in its initial years," says Kohli. They were then in
different companies: Kohli was with Escotel Services.
"Those were years of struggle for the industry, from 1995 to
1999 to 2000. The telecom industry was going through tough
times; losses were being made by every company. Those days we
worked shoulder to shoulder and hand in hand trying to get
government to make changes in policy."
Quality of service
Since those days Kohli was recruited by Mittal to lead
Bharti Airtel's mobile business.
It's a business that's booming and Kohli, who most admires
China Mobile among telecom companies, is clearly looking at
keeping Airtel ahead in the numbers game.
His priority, apart from numbers, is quality of service
— taking his example for his other favourite company,
Japanese carmaker Toyota.
Kohli, who now owns two Toyotas, is himself a great example of
how mobile technology has transformed the life of a
middle-class Indian to that of a globally savvy international
"It is telecom that will help India to lead and plug the gap
between India and the developed countries, and I want to make
my company the Toyota of telecom," he concludes.