The Hindu Business Line : Bharti rings positive tone on 999 Plan

WITH a very disciplined cost structure, Bharti believes it will be successful in its 999 Plan. The President of Bharti Tele-Ventures, Mr Manoj Kohli, says the company is heading for one of the lowest cost structures in the world.

Excerpts from CNBC-TV18's exclusive interview:

Why you need to get into it and tell us the volume growth you see versus the kind of ARPU (Average Revenue Per User) squeeze you are going to see within this scheme?

This is the most innovative scheme of the year from Airtel. This gives three big benefits to the customer. First, one receives incoming calls for life without recharging. He can recharge if he wants to for outgoing calls. Second, he gets full talk time for all recharges. If he recharges for Rs 200-500, he gets equivalent amount of talk time. Third, he gets a range of handset options starting from Rs 1,399, belonging to various handset models such as Nokia, Motorola and many others.

If there is no recharge, what kind of ARPU can you get, about Rs 70 per customer? Is that viable going forward?

That is not true because we believe that any incoming call will have an outgoing call. Outgoing calls will happen because people who receive calls will like to make calls. May be temporarily, for few days, some customers will not recharge, but otherwise they will have to recharge.

What kind of ARPU are you expecting from this particular segment? You say ARPU is not important. But broadening the market, is it not important?

Our business model is unique. In Indian markets, where the tariffs are the lowest in the world, our model is more on realisation and cost per minute. That is why it is viable and profitable and we stick to that model. If a customer gives me Rs 500 a month versus another customer paying me Rs 300 a month, and both offering similar realisation per minute, then both are good for me. Therefore, we do not subscribe to the ARPU philosophy, we subscribe to per minute effective rate, cost and margin.

Your total cost per minute is lower than Tata TeleServices' that started this entire phenomenon. What sort of volumes are you expecting from this scheme? This is a very strategic move by the company. We have an affordability strategy unleashed sometime in June with Rs 200 recharge coupon. It was extremely successful all over India. The market grew by about 50 per cent after June. This is the continuation of the same strategy. This strategy has key pillars, one is the network growth, Second is the distribution pillar where we really go deep into India. So, the availability of Airtel is like a matchbox. Wherever matchbox is available, Airtel will also be available. The third pillar is the handset. It is most important because that is the entry point for the customers. Our strategic partner is Nokia here. We have collaborated with Nokia and some other partners who give handsets and make it available in the smallest towns of the country. The good news is a lot of handsets with new batteries are now available in India for about Rs 1,000. So if somebody gets refurbished for Rs 1,000, pays Rs 999 for this scheme, his mobile will cost less than Rs 2,000, and that is great news.

Is this the bottom for tariffs? Do you expect people like you to knock tariffs even further? We are always sensitive to tariffs. We never lead tariff reduction. However, I believe the Indian tax on telecom is more than 20 per cent, which is one of the highest in the world. We believe the Government is considering reduction in taxes. If that happens, we will pass it on to the customers and I believe tariffs will come down further.

From your point of view, as far as expectedearnings go, you think this is the bottom for tariffs other than tax break-up that we may get?

We think tariffs are very affordable for Indian customers. They do not need any further reduction.

What impact will lower tariffs make on your return on fresh capital employed?

I think our business will be more viable and our returns will improve as time goes on, because our cost structure is very tight and extremely competitive. We are heading for one of the lowest cost structures in the world and that makes our company viable. So one needs to look at both the revenue stream as well as cost stream.