Spring Break
How to Make a Bundle in India
Shashank Singh (OG), Contributing Writer
Issue date: 2/2/04 Section: News
From a company with revenues of $10 million in 1994, Bharti is now approaching USD $1.2 billion in revenue and $5 billion in market capitalization, which makes Bharti India's ninth largest company in terms of market capitalization and makes Sunil Mittal a billionaire with about 36% of the company's equity. For a first-generation entrepreneur, who graduated from Punjab University, who dove into business at age 18, and who failed at a number of businesses over 15 years, this was a long way to have come.
And it doesn't end here - Bharti is doubling customers and tripling the number of minutes carried on its network every year, as India's mobile market grows subscribers at the rate of about 2.5 million a month. The market, meanwhile, is expected to grow from 30 million subscribers today to over 100 million by the end of 2007.
This spectacular growth is partly driven by the inexpensive pricing structure for mobile services in India. The line rental charge is only $3 per month and call charges range from two to three cents per minute. Despite high churn rates, the four biggest mobile phone service providers still manage to generate a profit from such pricing.
Mr. Mittal contrasted this to AT&T in the US: "AT&T has 21 million subscribers and average revenues per user that we dream of, and they still manage to lose money!" According to him, there are several inefficiencies in AT&T's operations which account for this, including handset subsidies, higher sales commissions and larger marketing costs.
These inefficiencies are characteristic of other American telecom firms as well and Mr. Mittal talked about either Bharti or China Mobile entering the US market with a radically different, lower cost business model, which could potentially change the face of the telecom industry here.
Mr. Mittal then elaborated on the positive outlook for entrepreneurs in India, pointing out that the Indian economy was poised for growth whereas many developed nations were hitting the plateau on the growth curve. He cited the case of Germany, where 65-70% of the wealth is in the hands of people over 65 years old and so growth businesses are limited to healthcare, insurance and some travel. As another example, he mentioned Japan, whose population is expected to shrink by a quarter over the next 100 years. In stark contrast to this, he said, India is booming. There are over 60 million vehicles in India (the most reliable data on consumption), and using this as a proxy, the consuming middle class is anywhere from 250-300 million people. And the GDP is growing at a healthy 8%. Coupled with increasing liberalization and economic reforms, these factors have resulted in a plethora of opportunities in the Indian economy.
And it doesn't end here - Bharti is doubling customers and tripling the number of minutes carried on its network every year, as India's mobile market grows subscribers at the rate of about 2.5 million a month. The market, meanwhile, is expected to grow from 30 million subscribers today to over 100 million by the end of 2007.
This spectacular growth is partly driven by the inexpensive pricing structure for mobile services in India. The line rental charge is only $3 per month and call charges range from two to three cents per minute. Despite high churn rates, the four biggest mobile phone service providers still manage to generate a profit from such pricing.
Mr. Mittal contrasted this to AT&T in the US: "AT&T has 21 million subscribers and average revenues per user that we dream of, and they still manage to lose money!" According to him, there are several inefficiencies in AT&T's operations which account for this, including handset subsidies, higher sales commissions and larger marketing costs.
These inefficiencies are characteristic of other American telecom firms as well and Mr. Mittal talked about either Bharti or China Mobile entering the US market with a radically different, lower cost business model, which could potentially change the face of the telecom industry here.
Mr. Mittal then elaborated on the positive outlook for entrepreneurs in India, pointing out that the Indian economy was poised for growth whereas many developed nations were hitting the plateau on the growth curve. He cited the case of Germany, where 65-70% of the wealth is in the hands of people over 65 years old and so growth businesses are limited to healthcare, insurance and some travel. As another example, he mentioned Japan, whose population is expected to shrink by a quarter over the next 100 years. In stark contrast to this, he said, India is booming. There are over 60 million vehicles in India (the most reliable data on consumption), and using this as a proxy, the consuming middle class is anywhere from 250-300 million people. And the GDP is growing at a healthy 8%. Coupled with increasing liberalization and economic reforms, these factors have resulted in a plethora of opportunities in the Indian economy.
