Can Gopal Vittal be the CEO Bharti has been looking for?

13 Dec,2013

By Anandita Singh Mankotia


Gopal Vittal

He’s been CEO eight months in an ultra blue chip company where, in recent times, CEOs have typically lasted three years or less. The company’s promoter, who’s achieved near iconic status in India Inc, is known to hold his chief executives to high, unsparing standards.


The CEO is right now in focus for a deal with an arch rival that analysts say could benefit the rival more. He has delivered, observers inside and outside the company say, on process changes. But the blue chip, while it needs process upgrades, needs vision, a big one.


Can Gopal Vittal 45, formerly of HUL, appointed by Sunil Mittal in March, be the CEO Bharti has been looking for – a leader who trims a bloated management structure but is also able to take big and successful bets on telecom’s future? Is the recent deal between Bharti and Reliance Jio on sharing towers and optic fibre networks a proof of a smart bet or of underlying weakness?


We spoke to dozens of people inside and outside Bharti to get a sense of the Vittal regime. No one, however, was willing to speak on record, citing a variety of reasons – company rules to client confidentiality. Mr Vittal’s own assessment of his tenure so far is that over the last two quarters, “costs are down by half…and focus is to grow data revenue”.



When he had joined, Mr Vittal had told his senior team, “Till now the company has grown in patchwork. The growth from here will be on the quality of customer acquisition and not quantity. We need to slow down the pace of acquisition but delve deeper into subscriber behavioral economics.”


Bharti executives close to Mr Vittal say he started as he promised. Senior management had as many as seven key focus areas. Mr Vittal cut it down to three: quality customer acquisition, cost cutting and data growth. The new CEO was soon seen as a leader who prefers to see things for himself at the sharp end of the business. Mr Vittal, executives close to him say, travels to Airtel’s circles regularly. “Sixty per cent of his work time is spend outside the headquarters,” an executive said.


Mr Vittal’s core team, under the interestingly named programme ‘Decay’, tightened sales and distribution networks, and targeted high revenue customers, weeding out low yield ones. Margins and realisation rates improved, customer churn decreased to an industry low of 3.3%, and the distribution network shrunk by about 15%. The last two quarters have seen the Vittal effect.


“The entire front end has been reenergised and aligned,” a close colleague described Mr Vittal’s strategy. But there was pain – and Vittal didn’t hesitate when many executives left. Or in hiring plenty of new talent.


More than 1,000 people have exited the company since Mr Vittal took charge, a large number of them at general manager and vice-president levels. Four out of the 12 members of the Airtel Management Board, the critical team of CXOs, have exited or are on their way out. The company, however, doesn’t appear to be worried about this.


Mr Vittal-led Bharti doesn’t seem worried. “Automation has led to processes getting simplified” is how a senior executive explained the departure of so many senior colleagues.


Mr Vittal’s new CXO appointments are a mix of in-house talent and executives with Western work experience. The latest to join the Vittal club is Harmeen Mehta, the new chief information officer. Mr Vittal introduced Mehta, who’s worked in Spanish and Latin American banking sectors, as “technology queen” to his CXOs.


Ms Mehta, executives say, will soon find out what they have – Vittal is “taskoriented”. “He gives you a job, a deadline and expects it to get done,” said a CXO. He added that “people orientation” was not Vittal’s style. “He’s straight out of the Unilever nursery”, is how another CXO described him.



A quite joke in Bharti’s senior management level is that the Vittal-led company looks more Lever than Airtel – because so much HUL talent has been imported and because so much of Airtel’s previous branding efforts have been nixed by Mr Vittal.


Before Mr Vittal took over, Airtel’s vision thing was that it was going to become the coolest brand for the young by 2015. The plan was set in motion in 2010. Thus the TV jingles “Jo tera hai who mera hai” and “Har ek friend zaroori hota hai”. Thus, too, a blitzkrieg of high global visibility sponsorships: Formula One and Manchester United.


But the music, so to speak, has stopped under Mr Vittal. “These events weren’t really adding much to organisation,” Mr Vittal told his team as he decided to rework brand visibility. Today’s TV commercials from Airtel emphasise data plans more and the cool quotient less.


A CXO said: “What we have done is to drive a lot of new users into the data category through the launch of our one rupee network store. Half of our customers come through this route.”


All this fits in with Mr Vittal’s ‘cut costs, get well-paying users’ strategy. It’s potentially changing, as Mr Vittal wants, Airtel from a mass brand churning out dozens of minutes on its networks to a service provider that makes money through selling megabytes of data. It’s making understanding consumer behaviour analytics critical for Airtel’s strategy – the company needs to predict which kind of customers will be big consumers of data. That, too, is part of the Vittal plan.


But can the successful cost-cutter become the visionary who takes Airtel to big data territory? Many industry observers note that under Mr Vittal, capex has gone down



Mr Vittal stopped adding cell sites to Bharti’s network. This brought down costs. But does it point to a strategy that’s losing the big picture. A CXO close to Mr Vittal differs. “2G cell sites don’t need such heavy investment anymore, within the next few years 2G will become a legacy network that’s why we have reduced our capex this year,” he said.


This CXO said Mr Vittal had to put the “house in order” before he took the big leap in data. Is the Bharti-Reliance Jio deal the first big step of that big leap?


The data challenge for Indian telcos can be explained simply. India, thanks to extraordinary official shortsightedness, is a spectrumstarved market and will remain so in the foreseeable future. That means telcos will need to be innovative. But the thing with data is that infrastructure for carrying data needs to be in place to take advantage of a big jump in consumption – big growth in data business happens in spurts, and companies which don’t have carriage can miss out.


And the best way to carry data is through fibre optic. The fibre-tohome (FTH) strategy is the best bet for a data revolution that matches the scale of voice revolution in India. But FTH is a money guzzler. And Mr Vittal’s handicap is that thanks to Bharti’s Africa venture and its 3G spend, the company is debt-laden. Appetite for capex on data network can’t be big, even if the CEO wants it to.


Bharti would have had to spend billions of dollars for laying out FTH networks and paying for ‘rights of way’ in each state. A Mr Vittal-appointed CXO says Bharti is in talks with the government to “rationalise” rights of way expenses. But that’s, first, an elusive goal, the executive says and, second, the issue of spending money on fibre still remains.



Is the deal with Reliance Jio the answer for Bharti’s data plans? Analysts who closely study the company aren’t sure. They told us that Bharti has little to gain beyond fat rentals from the tower-fibre optic sharing deal. Jio gets to use Bharti’s existing network and get a fast roll out while Bharti waits for Jio to lay down its fibre optic network. White Bharti waits, Jio, thanks to Bharti’s towers, may make a huge market impact – that’s what analysts reckon.


But Bharti CXOs who spoke to us don’t agree. They say use of Jio’s fibre network is exactly what the company needs for its data plans. They argue the deal with Jio will help reduce capex but give Bharti a good play in the data business. “We are confident of expanding our market,” says a CXO, when asked about competition from cash-rich Jio.


Airtel’s – and possibly Vittal’s – future depends on that argument turning out right.


Source:The Economic Times

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