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Having invested $ 350 m to date, Chief Executive Officer/Managing Director Suren Goonewardene recaps success and contribution so far, shares key insights on industry issues and outlines future plans
Going through the phase of growth and development is certainly exciting but it is the reaching of a milestone that calls for celebration. India’s Bharti Airtel, having set foot in Sri Lanka in 2009, completes five years of operations on 12 January and is confident of keeping the momentum going.
The existence of the telecom giant, which is the fourth largest in the world, has undoubtedly helped transform the nation’s telecommunication landscape as it brought in a unique value proposition, values added services and enterprise
solutions. Having managed to achieve in five years what took other telcos two decades, Airtel is ready to take the lead in the industry, having warmed up within that period.
Bharti Airtel Lanka’s Chief Executive Officer/Managing Director Suren Goonewardene, who joined the company in 2012, spoke to the Daily FT on Airtel’s current position, challenges faced and future plans, including its expectations from the Government and the regulator to be the best mobile service provider in Sri Lanka.
By Shabiya Ali Ahlam
Q: In operations for five years, how would you describe Airtel's progress and where is it today?
A: Airtel was launched in 2009 and we were the first operator to achieve or install 1,000 base stations very quickly, that is within the first 12 months of operations. We also put on board one million customers in a very short span of time. In addition to this, Airtel also deployed an island wide 2G and 3G network and is currently in the process of expanding this in areas where we are not in operation. Basically we are enhancing the customer experience. During these five years we have brought in many value added services, product propositions and enterprise solutions that are unique to the Sri Lankan market.
The combo pack launched is one such unique service and the youth segment literally gobbled it up as soon as it hit the market. Data propositions in terms of speed and product construct have also been unique. We have not given a plain vanilla product type to the users. Instead, Airtel has customised its product and services across all age groups and user segments. This has gone down very well with all our subscribers.
Other telcos have been in Sri Lanka for about two decades or so. Our achievement in the past five years is phenomenal compared to what other operators have achieved within 20 years.
Q: Being the fourth largest mobile service provider in the world, what has the company done to transform the telecom landscape of Sri Lanka?
A:In terms of products, unique value propositions have been brought into the market and that has changed the way pricing is adopted in Sri Lanka. At the time Airtel walked in, the market reacted to our coming in and they pushed prices further down. I am not too sure if this was the right move by other operators, but it brought in a floor rate which has now become a ceiling. From a long-term perspective, viability of certain operators can be at risk because we cannot take the prices up, since for that to happen operators need to get together in some form or the other. Those intricacies have to be dealt with.
Q: What makes Airtel stand out from the rest of the telcos in Sri Lanka?
A: Airtel is a very youthful company and has a flat structure. Our cost structures are very lean and we are also highly ethical and look into a lot of governance and ethical practices. That I think stands out in everything we do.
Q: Airtel recently invested Rs. 2 billion on 3G network expansion; what is the total amount invested in the past five years and in what areas?
A: To date we have invested about US$ 350 million (around Rs. 45.5 billion) in Sri Lanka. This is a significant quantum of FDI which has come into the nation and this came at a time when the war was still on. That is a significant milestone from the part of the Sri Lankan Government also to attract an international global operator to set foot in the country. We will continue to put in money where it is needed.
With regard to the recent investment, it’s a country wide network and the Rs. 2 billion investment is to augment present coverage if there are gaps or bad customer experience in particular areas due to congestion. The aim is to enhance customer experience. There are also towns and villages that are fast growing because of the infrastructure set up that is taking place. We are looking at these rural areas that are being urbanised and we are investing in area where we feel there is potential. The Government is also actively building the IT infrastructure and in line with that vision, Airtel is also building ICT. So there is development coming in, especially amongst the youth who are very IT savvy.
Q: What are the future plans?
A: The medium term plan is the deployment of the new infrastructure. We will be going into more enterprise corporate solutions where we will give customised solutions to the corporate base.
Q: Will Airtel launch any product to mark the five-year milestone?
A: We are not having any product launch but we will be embarking on few CSR activities. We have a project going on at the Lady Ridgway Hospital for Children. It had a depressing atmosphere so we painted and decorated the corridors so children would feel cheerful. Airtel will be gifting furniture to the OPD section of the hospital so more doctors could be accommodated and their patients could be served in a better manner. Currently the environment there is not so conducive so Airtel aims to uplift it.
In addition to this, customers and partners who have been with the Airtel network will also experience various value added services, data packages and attractive promotional offers in lieu of this celebration.
Q: When Airtel started operations in Sri Lanka, to capture the market it offered calls and very low rates and this led to price wars in the industries. But despite that effort, the company posted significant losses. Are you still making losses or breaking even/profit?
A: For a telco to set up heavy capital expenditure is required and in the first few years of operation there is a significant amount of depreciation that goes along with the cost of entry to the market. We are on the verge of breakeven. It will be sooner than later. When looking at our financials published in India, it is observed that there is a very steady growth from the time of inception in terms of revenue. Certain cost items have hit us and that is natural for any telco.
Q: Speculation has resurfaced that Airtel plans to sell its local operation to Etisalat or Dialog. Not only did the local media report this but recently an Indian publication also reported the same, stating that the two companies had been negotiating for five months and the deal would be closed soon. Could you shed some light on this?
A: Airtel has a policy where we don’t comment on media speculation.
Q: Does Airtel share the view that there are too many mobile telecom players? If not, why? If yes, what are your suggestions on consolidation?
A: There are too many players in the Sri Lankan market for a population of about 21 million. As for consolidation the industry can only do so at the right price and if a telco is willing to sell or exit. I am unsure if anyone is willing to exit the market because Sri Lanka has a lot of potential and has an economy that will grow greatly within the next couple of years. Everyone wants to be a part of that.
Q: All other telcos are aggressively promoting 4G, but Airtel continues to focus on 3G and the company didn’t participate in the auction for 4G spectrums that took place earlier this year. This was looked at as an indicator that the company does not have long-term plans for the Sri Lankan market. What is your view on this?
A: I would take this as an opportunity to put this in the right perspective. 4G is a new technology that has come in and 4G devices are very expensive. It is not easily available to the mass market. Secondly, to roll out 4G, a certain amount of capital investment is required and any operator investing now has to have at the back of their mind a certain amount of returns. If that is not going to come through over a span of two to three years, my opinion is that the investment should be held back for the moment. Airtel is looking at expanding 3G because we feel this is what the market can take at the moment. However, at the right time we will certainly introduce 4G, which is when the devices will be available and affordable to the mass market.
Realistically looking at this, what percentage of the population can afford an iPhone? It is a very small proportion and we will be playing to a niche market. So it doesn’t make sense to invest a huge quantum on this area right now. Certainly when the time is right Airtel will explore this sphere as well.
Q: How does Airtel see the current status of the mobile telecom industry and the future?
A: The current status of the mobile telecom industry is very competitive and growth will come when the economy also starts moving up. In the next 12 months the industry should bounce back. Once the Sri Lankan economy become buoyant, the mobile industry will also start growing. More money in the wallet means more spending and that is good for us. The future is looking very positive for the telecom industry and most operators have invested in the right time. The consumer is there to benefit since we will be providing world class experiences which are not even available in some countries in the developed world.
Q: What challenges does the industry face? What should Sri Lanka get right to have a healthy telecom industry?
A: The challenge the industry would face in the next 24 months is inflation rate pressures. Energy costs is something that is going up, in fact it already has gone up. If there is further hike in energy prices, that would have significant impact on the telcos. If the energy price does increase further, then the tariff would have to be looked at again. This is because it is arguably the lowest in the world, be it voice or data. Even IDD and roaming prices are very cheap in Sri Lanka. This would be under threat if energy prices shoot up and that would be a serious challenge we would be facing.
Q: What role should the Government and the regulator play?
A: Currently the regulator is doing a very good job in managing the industry. I stress that energy prices are important to the industry and in terms of taxation we have to be careful as to how users are taxed because at the end of the day we are giving rock bottom prices.
In the 2014 Budget, the present rate of 20% applicable on telecommunication levy was revised to 25% while the concessionary rate of 10% on services provided through internet and broadband to facilitate IT and BPO sectors remained the same. Therefore, the Government should be sensitive to such factors since when taxes are imposed. Consumers will use less ICT and that goes against the norm of what the Government is trying to do in terms of ICT through their network. With this the consumers are being hit and eventually the operators will also be impacted.
Q: All the other industries are complaining about not having a sufficient skilled workforce to service their fields. Does this issue also apply to the telecommunications industry?
A: I think from a technical point of view we have good and enough engineers and IT people. Where we lack talent is in the area of customer service. That segment of workers that we should look at is from a service point of view because it has a knock-on effect on the BPO industry as well. From a mindset point of view, that element of service is missing.
Q: Celebrating five years of operations in Sri Lanka, what is the message you have for your customers and competition?
A: For customers our message is that we will continue to give superior service. For the competition, what we have to say is that we will be giving one heck of a run!
Pix by Daminda Harsha Perera
