I'll Call Again

To do a mega deal and make a big splash of it is one thing; to have failed twice and still make the headlines is another. Sunil Mittal, 52, has mastered this art.

In over two decades, the small-time Ludhiana businessman has become India’s top telco, beating the Tatas, the Ambanis and the Birlas. Not content with success in India — Airtel is the largest, the most profitable and the fastest growing Indian telco — Mittal is dreaming big. With the $23-billion Bharti Airtel-MTN deal, he would have turned it into an emerging market powerhouse. It would have made Bharti Airtel the third largest telecom operator in the world with over 220 million subscribers across 24 countries. It would also have allowed him to test his unique outsourcing-led business model of low cost, high volume and high margin that has been so successful in India, overseas. Also, the deal would have given Mittal his next entrepreneurial fix — a new battle ground and a new challenge.

Lobbying was done at the highest levels. Prime Minister Manmohan Singh openly backed it. Finance Minister Pranab Mukherjee welcomed it. And the top honchos of corporate India wished Mittal luck from the sidelines. Had it gone through, it would have been the biggest cross-border deal for India Inc till date.

But this was not to be. With many unresolved issues, Bharti-MTN deal was finally called off on September 30. It was easily among the biggest business failures of 2009. And for Mittal, its chief architect, a big setback. Yet in the failure and his losses, Mittal has broken new grounds. It showed the dreams that Indian entrepreneurs can dream now.

That’s why this no-deal is a big deal and its key architect — Mittal — is in the Forbes India people of the year list.

There are many things that set Mittal apart from other Indian promoters. A first generation entrepreneur, coming from a political family, Mittal used his few weapons — speed and nimble-footedness — well to beat the Tatas-Birlas-Ambanis. He has often broken conventions and made bold moves. He pioneered the outsourced telecom model where virtually every part of his network was given to third parties for an efficient network expansion.

It is never easy for first generation entrepreneurs to give up control. But Mittal realised early enough that giving up does not always mean giving away. Airtel’s success is a story of how he managed to build a top-calibre global team and empower them. It is also about how he forged win-win partnerships with MNCs, when suspicious Indian promoters saw it as only a win-lose game. From British Telecom (BT) to Vodafone, SingTel to Telecom Italia — most global telcos have partnered Mittal at some point.

“Some have exited and some have remained on board — but all of them made money and left on a happy note,” says Mittal proudly. In 2007, when Vodafone, which had 10 percent stake in Airtel, wanted to buy a controlling stake in Hutch-Essar, “we could have blocked it. They needed permission from us,” says Mittal. One call from Arun Sarin, and the release was given. “We are made very differently in many senses,” says Mittal.

In many ways, Mittal is a 21st century entrepreneur — a multi-dimensional leader with a global world view. Long back, when BT invested into Bharti, Mittal allowed it to bring in its chief financial officer and chief technical officer and in the process learnt enormously about processes and scaling up. Today, IBM is helping him learn talent management. Addressed by his staff by first name, he doesn’t mind being questioned, contradicted and engaged in arguments. Not too many Indian promoters can lay claim to that. “Articulate, extrovert, he is the kind of guy who is accessible and will put his arms around you,” says Tarun Das, president, Aspen Institute India, who has worked closely with many top Indian industrialists.

With a nomination on the Carnegie endowment, and on Tony Blair’s international climate council, Mittal is a sought-after CEO around the world. Mittal’s media managers unanimously admit that nobody can handle media like he does.

But clearly, all this wasn’t enough for Mittal to seal the deal.

This was the second time Mittal was talking deal with MTN. In fact till the very end, he sounded confident. “MTN is an important deal. It’s a well thought out deal. It has been in the works in some sense for a long time,” Mittal told Forbes India in July. And he did everything he possibly could — lobby the government, camping in Africa.

So what went wrong? There were regulatory challenges, diplomatic issues and nationalistic egos that needed to be handled. The expectation was Mittal — who led the global charge — would have factored all that in.

“They underestimated the complexity of the deal,” says Rajeev Chandrashekhar, industrialist-turned-politician.

The deal failure will slow down Mittal’s global aspirations. MTN would have been the bridge to get access to 22 countries in untapped and difficult Africa. There isn’t a comparable option. Humbled, Mittal says he will not wait for one big deal to materialise; instead, he will follow the string-of-pearls strategy. This would mean incremental, long-drawn and a more difficult way of becoming an emerging market MNC.

All this will be made difficult by the shifting dynamics in the Indian telecom sector. Airtel is under pressure with a fresh wave of competition and regulatory challenges on issues like spectrum allocation. Tariffs are tumbling even as growth slows down in the cities and picks up in low-ticket rural areas. After a long time, market leader Airtel is on the backfoot as old competitors — now Tata-Docomo — show new vigour in the market and new competitors like Uninor are opening up new battlefronts. From aggressive per second pulse rates to now crashing SMS rates — suddenly Airtel looks like a poor follower, not a leader. Sizzling growth and high margins — two things that made Airtel a fairytale for investors — will be difficult to hold.

It looks like Mittal may end up with far more excitement than he had bargained for in his entrepreneurial journey going forward — both in India as well overseas.