Home/Speeches / Amalgamations - MMA Business Leadership Award 2008-09

Amalgamations - MMA Business Leadership Award 2008-09

Chennai, August (2008)

Respected Mr.Sivasailam, Ms. Jayshree, Mr. Rao, Mr. Bhargava, other Jury members, Mr. Vaghul in absentia, family members of the Amalgamations Group, distinguished friends from the business community, ladies and gentlemen

It is indeed a great privilege, an honor for me to stand here today amongst this august gathering to receive this award and being added to the list of those illustrious names of people who had received this award in the earlier years, ahead of me. Each one of them are outstanding individuals, great doyens of the Indian industry and I feel truly humbled to be in that Hall of Fame. I am also acutely aware of the responsibility that this award puts on the shoulders of an individual. MMA is the oldest management association and I'm aware of the legacy and history that this award carries. The Amalgamations Group has been deeply associated with it besides its founder and I therefore with great humility accept this great honor from Mr. Sivasailam - thank you very much.

I am supposed to give a Memorial lecture but these lectures usually are very long and I know that this group would rather hear some crisp points rather than me going through a long lecture. I will do my best to share with you some of the moments of triumph and tribulations that an entrepreneur has to pass through to reach a point where a distinguished organisation like MMA will deem it fit for its outstanding jury to come up with a name for such a prestigious award. Individuals become symbols of receiving such awards but there are so many factors, so many circumstances struggles of a number of people in one's life that become responsible for such an honor. Indeed an individual is honored but there are a lot of other people who get honored alongside and in my case it is no different to who all have been the factors, in fact more important than me as an individual who deserves this honor.

I think first and foremost I will talk about the journey of a young entrepreneur in an industrious town called Ludhiana, just out of college at 18 trying to make some sense with 20,000 rupees in his pocket. Even in 1976 it was not a princely sum. Acutely aware of my financial limitations and more importantly the lack of any sort of experience other than having tremendous inspiration from people that I saw while growing up and one of them being of course Shri Brij Mohan Munjal - who was the last recipient of MMA award. In some sense, he was my guru because it was at his feet that I learnt my early business lessons. How can I forget those days when I used to manufacture and supply bicycle crankshafts including, to the Hero Group where I would go outside his office on days which were not appointed for payments and ask him for a favor to issue me a cheque for 5000 rupees. He was always very generous but he would always tell me – not to get used to this sort of favours. Yet again the following month would come and I would run short on cash and indeed one place where I could go for sure was to him. He had great wisdom; he would give me the money but would drop some pearls of wisdom in my lap. Those were very important lessons in my life.

Clearly, it was a very hard struggle, a tough beginning, a lot of perspiration within Ludhiana and of course beyond and there was this desire to do something exceptional. Most of the people would tell me that the grand stand positions had been taken - Tatas, Birlas, Dalmias, Singhanias, there were plenty of names including many illustrious business that included the Amalgamations Group and many more such business in the Southern and Western parts of India. Closer home there where Hero cycles, A-1 cycles, Atlas cycles, Oswals, who had made some strong business moves post India’s independence. My inner voice was telling me to get into something comfortable, get into something stable and I don't know whether Mr.Bhargava would recall I did make an attempt to get a Maruti Suzuki agency for Ludhiana. I actually tried very hard but I am sure one day he is going to tell me that the reason why I didn't get it. But it was a blessing in disguise. In fact, it was before applying for the Maruti Suzuki agency, as one of the largest importers of the Suzuki motor company for portable generators into India, Suzuki had made the one recommendation for an agency, not for Mumbai, Delhi or Chennai but for a much smaller town, than Ludhiana and even that was not granted.

Equally I think I share a lot of joy of my connections with the family. One of the family members was keen to carry on with some business of automobile dealership and I made a presentation to TVS Suzuki after having failed with Maruti Suzuki and I don't know whether Venu is aware of it or not, I did get the agency for selling motorcycles in Ludhiana, but it was the right product in the wrong place as it was Hero Honda territory. There was no way Mr. Munjal would have allowed me to succeed in that and on a serious note that was the time when I was trying to find something very novel, something very different to do. As a very young person, I picked up one very clear nugget of wisdom that if you want to be reasonably big in this country you have to start something new, if you are going to follow the big boys it is going to be impossible to beat them at their own game.

I grew up in a city with massive power shortages and that was the case with most parts of India including Chennai and I struck upon a novel item called portable generators and landed myself at a very young age with an agency of Suzuki motor company to sell their generators in India. I had a small office in Madras in those days –including one at Mumbai, Delhi, Calcutta and I made a roaring success out of that business at very young age of 22, 23. I would land into Hamamatsu; this was actually before Maruti Suzuki was signed, in fact I was in Hamamatsu, the day Arun Nehru came to sign the Maruti Suzuki deal and I had a brief moment to shake hands with him and that became a big success but we were living in very difficult times. There were huge government interventions in every business that one was involved with. One fine evening a notification came that the import of generators were banned. There was no business, a small little office in Delhi, much smaller offices in other parts of the country and there was no business to be had.

I packed up my bag and went back to Japan that was my place of work. I used to spend a lot of time between Tokyo and Hamamatsu to look for some inspiration. Everything needed a lot of money, electronics was moving at that time but clearly very large sums of money were required. I went to Korea and Seoul again, nothing happened and until finally I landed up in an electronics fair at Taipei in Taiwan and saw a pushbutton telephone for the first time in my life and this was at a small company Kingtel. I met the owner Mr. Richard Wu, shook hands with him and then decided to import knock down phones into India and that was how India's first pushbutton phone was introduced.

A tiny business was then formulated, building and assembling these phones in an odd place i.e in a garage in Ludhiana and then I brought them out into the market for selling. It was a reasonable success and we started selling pushbutton phones replacing the traditional old rotary phones that were being used. There were less than 1 million phones in the entire country as most of you would have experienced at that time, getting a phone connection was very tough. And most of the times when children were born, one of the many things that wealthy families did was to book for a phone connection in the child's name so that by the time the child would have grown up to a reasonable age, they would have a phone connection available. The sales were low but with very high margins because it was a novelty and one could therefore command premium rates. This again lasted for about two years, as the government decided that it couldn’t have just one little entrepreneur supplying push button phones, so they opened up the sector for the first time to the private sector and about 57 business houses and you could name the Who’s Who of the business houses like the Tatas, the Birlas, the Thapars, state government undertakings everybody went in for a phone license. Those were the days when you applied for licenses even if you didn't have anything doable, as business licenses had very great value. Finally about 20 such business people launched their phones. We were ready as it needed not too much of capital and we were the first ones to launch a Siemens technology-based Beetel phone in this country in 1985. Beetel is still today's India's largest phone manufacturing company, still remains one of the only manufacturing businesses in the group out of a plant in Ludhiana where we had started manufacture of most of these phones.

The romance with Telecom had already begun and by this point in time there were many other small businesses including the TVS Suzuki agency. One by one we started disinvesting all the other business and put all the capital we had into India's first answering machine, India's first fax machine, India's first cordless phone and became a reasonably important player by 1991 in the mobile telecom terminals because we were terminals. But what was the size of the company? It had started to make some impact and in 1991, not so long ago we had 25 crores in sales, five crores in profits - $5 million in sales and $1 million in profit but clearly the ground was slipping. There were other companies which had started alongside and had started to manufacture switches, EPABX, some went into jellyfill cables and some into transmissions. We were uncomfortable with business-to-business products which were sold only to a few and we wanted it to be mass consumer retail lead businesses and that's where we stayed, but 25 crores in sales and five crores in profit was not going to take us very far. We knew the limitations of our business and do remember that there were only a few million phones at that time.

In 1992, second of January 1992, I saw an advertisement, while having a short break in Goa, of India deciding to allow private sector to come into mobile phones. I knew then and there that this was my moment to seize. We understood telecom, but we were ranked outsiders - a very small company. I put together a ragtag consortium and joined the ranks of 29 other illustrious consortiums of the who’s who of the world and the top business houses as partners and rolled my dice.

14 companies got selected in March that year and these 14 companies were again the Titans and the one surprise company out of that was our company Bharti Telecom. It was not because we had something exceptional to offer it was because the technical bid that was submitted to the government was one of the most outstanding bids that this country had ever seen. With very limited capital, I had submitted aerial photography, helicopter photography, digitized maps we had done something which this country had never seen before. I knew this was my now or never moment so I put in everything, after taking a leave of absence from my business for about 6 months, prepared this tender because we had to impress the authorities and as it later turned out when we were challenged in the courts by the big boys who had lost out, we were actually granted all the four licenses in Delhi, Mumbai, Calcutta and Chennai despite Rajesh Pilot, the then minister who intervened to say one company one license. Were we disappointed? Absolutely not, we were delighted because we could only do with great difficulty at just one place.

Tata’s and some others went to the court, we were challenged in High Court it was a long drawn out battle, finally we went to the Supreme Court where we were downgraded from Mumbai which we had won, to Delhi which in any case was our first choice. I would say there was a divine intervention here as well. We lost but to win. We launched Delhi’s first mobile phones in 1995 and which took a lot of effort and money. My earlier estimate on the back of a very small balance sheet was that we needed a 100 crores but the project ended up being 300 crores. It was one third of my estimate and we really had to struggle hard to go and launch ourselves but one thing was very clear, as we were ranked outsiders, the network had to be the best as we were competing with Essar at that time who were our competitors in Delhi, having bought their license from Sivasankaran and we knew that we had to really enthrall our customer base and decided to launch India's largest single city network at that time with hundred sites which was very large at that time, very small today and thus became one of the earlier entrants in this business and I could probably say the rest is history but there have been many difficult times during this journey.

India didn't have too many mobile phones; there were expensive, handsets, the kit. Network was expensive and it appeared to us that we had to limit our ambitions of being a north Indian player by then targeting Himachal Pradesh. We worked in Punjab for a long time, did get a license and some of you may remember that there was a mad round of bidding subsequently where one company bid in those days a staggering amount of 85,000 crores for winning a few mobile licenses. That bid went awry as it had to go through a process of granting licenses to different companies but we were very clear having committed to those kinds of funds. These companies were only waiting for us to fail. We had to buy time as we had to strengthen ourselves, raise more capital, we bought private equity we bought a number of foreign partners with us and we were ready. When they started falling we started picking them up, Skycell in Chennai, JT mobile in Andhra, Karnataka and Punjab, Spice in Calcutta and Oasis in Rajasthan. Alongside that we were building a large number of new projects, there were about 14 projects going on at the same time. This was till then a tiny company; we were in losses, telecom takes a long time to come out of it but we were determined and that to my mind is the second factor for this award i.e. perseverance.

There were tremendous odds, I was always told that telecom companies can only be run by very large state enterprises or very large business enterprises as it needed deep pockets. How deep should they be I never realized and had I realized I may not have gone into this business, thank God I never realized how deep, deep meant. There was a time when it was not a question of “if”, there was only a question of when we would collapse. The big boys had entered - 2001 saw the entry of BSNL into this game, Reliance came in, Tata’s finally came in with all the gusto and the question was when we would collapse. The fact is many of the other entrepreneurial led telecom companies did collapse, some we bought, some were bought by others - one or two even closed down but the lesson here was very clear that you had to carry on there was no choice. In this business you either grow or you get amalgamated into somebody else and they grow you, that is the only way, you cannot be small in this business, scale is everything. Most of the business can’t claim that but telecom scale is extremely important world over. You see the mega mergers and acquisitions will clearly suggest that this is one business where scale is extremely important.

We made some big bold bets during that time, we outsourced our network as mentioned by Jayshree, we outsourced our IT, call-center outsourcing was already the norm so that was nothing new and that was a religion changing game for this industry. I got calls from all over the world – Germany, my friends in Verizon in the USA, Vodafone, British Telecom, many of them were my earlier partners. Telecom Italia from Italy said that I had completely lost my mind to give away the network and IT to outsiders. For me there was no choice, we were adding thousands of new people; we had no time to give them any training or induction. The battle was very-very fierce and we had no choice but to give a rifle and a uniform to everybody who came in through the door of the company and they were sent to the front to fight the battle - untrained.

The ship was rocking; I could clearly sense that if we did not do something dramatic the company could actually collapse or cave in. There were debates between our own senior leadership team. There was a clear division of those who believed in this formula and those who felt that its best we stay with the safe territory of running it ourselves. A select few led by me said we will need to add at least 10,000 more people in the next one year and these were all white collars senior managers, engineers, people who handle customer care issues from the banking and credit card industry - I said that there was no way we could assimilate such a large group of people within us. We must take a bold and brave step and we took the leap of faith, went to IBM, shook hands and gave them our IT. Right from the laptop on my table to the most complex piece of IT, it was given to them. There were gasps around the world. We gave our network to Ericsson and Nokia, at that time Siemens as well which is now with Nokia and they started managing our networks. We started to concentrate on customers, needs of customers, innovation, delivery of services, developing our brand and today this model is being adopted by the globe.

When the fight with the big boys started, another candidate for this award was ‘Hope’. We were dying, I was traveling across the country, I must have traveled during that one year to almost every part of the country, meeting my troops, having reviews all day, looking at what investments it will take us to get us out of that particular hurdle and celebrate with them in the evening. My only job was to give them hope and I was reminded of a movie that I had seen during those days in which General Krushchev was pacing up and down when they were losing the battle to the Germans, and he asked a question ‘What shall we do to turn the tide?’ and he was a very strong personality. So not many people could speak when he was saying something, he was pacing up and down and a meek soldier said give us hope. That was for me the lesson of a lifetime and the only job I had was to give hope and that is what I would say to my people, in the evening when we would roll up our sleeves I would celebrate with them, dance with them - the only thing I would tell them was that we are expected to lose, we don't have the muscle, we don't have the firepower, we don't have the political connections, we don't manage the regulation; the only thing that we have is our work, we are expected to lose but just in case we win that will make history, and to my mind that carried us through the day and every other day.

By and by I started seeing one part of the company after another rising, gaining customers share, gaining revenue market share to a point today where this company has the second-largest market capital in the country in the private sector, it will be crossing $10 billion of sales next year and in the event we are successful in our quest for acquiring and merging and collaborating with an international player like MTN, then this will be the third-largest company in the world in telecommunications.

Such things don't happen just by hard work, there are many, many factors at play and I very strongly believe one of them is you have to have divine blessings for getting exceptional success like this and the other factor I feel is that you have to have complete alignment at home as well.

I haven't had a single day when I was traveling like crazy or when I was coming home late to encounter stress at home. There was never a situation with the children, my wife, my brothers; where they would ask me where I was or what's going on here, where is our family time, the whole family was attached to the cause because they could see a very visible public battle going on. Every morning when you open the newspapers you know some action was going on, so almost everybody was connected and if the family knows that you are late in the evening at work and not at a pub having your last drink and you're trying to fight those difficult battles I think you get a lot of support, so I was very fortunate that I was aligned at home as well.

Exceptional success requires some exceptional gestures. Very early on we decided that we have a responsibility towards the society, we are businessmen because we have chosen to use this canvas. I with great difficulty graduated from Punjab University that is not one of my strengths, I am not a doctor I'm not a lawyer I'm not a scientist; I'm an entrepreneur, my canvas is therefore enterprise, I do not see business in the same way that traditional businessman would see it, for me this is a vehicle for change.

My view is that mobile telephony has changed India's GDP growth rates; it has changed the way this country lives and breathes. I believe other business that we are attempting to do have similar potential of game changing in the society and I believe if you have had exceptional success you need to give something back. We discussed and debated about what we can do when you become a successful company, as many of you can imagine that there is always pressure on you to do various programs in the society. We said we must focus because we just don't want to write cheques, we want to make a change here, we want to make an impact. We chose primary and secondary education in villages as our primary focus area. We set up Bharti foundation; endowed it with 200 crores and decided to launch 500 schools in the villages which will educate hundred thousands of children. 238 schools have become operational; about 40,000 children are in these schools. Mid-day meal, uniform, books, brand-new buildings are built, in every village. We have kept most of the programs in North India but I am delighted that we have made one exception and are going to open ten of these primary schools in Tamil Nadu and we hope that we can do more in the future.

What are the key lessons for tomorrow's young entrepreneurs, leaders who will do better than those in the past? I never had any illusion. There is a time for everybody under the sun. Many have had it in the past, I have the fortune of having it in recent years, and tomorrow there will be better, smarter and more creative young entrepreneurs who will eclipse what we have done. That's the way life goes on and that's the way life should go on.

For me the biggest lesson is that there is hope for every individual out there. One should remember and take inspiration from stories of young entrepreneurs; it has started to happen in this country. Infosys, Zee TV, Jet Airways, airtel, I can go on naming many such examples. This used to happen only in the USA. A typical garage to big business stories only emanated from the West and it has started to happen and a lot more frequently in this very country. This is going to gather momentum because the time is right, this is a continent of consumers, 1-1.2 billion people need products and services. They are growing at a rapid pace, their aspirations are growing upwards, and they’re getting restless. Therefore there has never been and never will be a time like this for entrepreneurs to roll the dice. Money is available, private equity, venture capital; banks are willing to fund ideas. No more is there a need for hard collaterals - show me machinery, show me land. People are funding ideas today. India is becoming a land of soft power and that is not going to go away, that is only going to strengthen hope for everybody because there will be an opportunity for everyone, but remember waves come and waves go, so you have to seize these moments and pick up the right product.

Do not get de-spirited if Maruti Suzuki agency does not come through, “Carry on’, I say a salutation in all honestly because something very cherished will come at the right time. I’ve had my own failures for the first five years between 1976 -1981 there was nothing but failures, but time is the biggest learning. That period really enriched me when every evening I used to sit down and wonder how I was going to manage my next day. There is only one life and I am sure many of us who have assembled here have the choice to do what they like, or like what they do. The big difference between spectacular, outstanding success and ordinary success lies really in these two lines. Many of us have the liberty and opportunity to do what we like because for me every morning when I wake up I have that sensation and vibration in my body and I'm dying to get behind my desk. Working is not a problem for me; it's a pleasure because that is what I enjoy. If somebody would have forced me, to become a doctor I would probably have been a miserable and a bad doctor. Allow your children, read their early signs, see what they want to do and encourage them. The good news is today’s entrepreneurs are probably giving that last refuge to those who have not studied very well. I would say in conclusion to encourage entrepreneurism as it is extremely important.

Let me say in closing how delighted I am to be here amongst all of you, it is my pleasure to be here in Chennai. I came here last evening, had a very nice evening with Mr. Kumar, had a chance to address the YPO’s( Young presidents organisation) this morning, spent about four hours with my various businesses here and here I am ending my day with this grand illustrious award from the hands of Mr.Sivasailam.

Thank you