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India's phones-to-farms operator
Jo Johnson and Khozem Merchant
10/26/2005
 

          For an entrepreneur who has made billions of dollars operating nearly one in three mobile phones used in India, failure comes as an unexpected shock. In recent weeks, Sunil Mittal, chairman of Bharti Enterprises, whose listed mobile arm, Bharti Televentures, has a market value of $13.4bn, has suffered two big setbacks to his plans to diversify the family-controlled company. He has the confidence not to try to hide it.
In an interview at his offices in the shadow of the Qutab Minar minaret, a 12th-century prototype of his own transmission masts, which looms over a corner of south Delhi, Mr Mittal is refreshingly frank. His ambitious move into agriculture, with the goal of unlocking the wasted potential of the country's farms and making India one of the world's biggest exporters of fruit and vegetables, has had a tough first year.
His vision was to overhaul India's inefficient food chain and in the process change the lives of many more than have been touched by the telecoms and outsourcing revolutions. Some 65m Indians have mobiles and 1.0m work in information technology but 650m live in rural areas. The idea was to connect India's farms with the world by modernising a clapped-out supply chain that allows most produce to rot long before it gets to market.
So far, however, the results of the agricultural project, for which he set up a joint venture, FieldFresh Foods, with Rothschild investment bank, have "mixed to poor", he says.
According to the original plan, Bharti would manage the contract farming, the financial support and the serious lack of infrastructure for grading, storing and shipping. Rothschild would open the markets abroad.
"This is work in progress," he says. "We have sent over the first 30-40 shipments, but it has been much tougher than we thought." Twenty containers of grapes went to Holland. Only five survived. Mushrooms were "a 100 per cent wash-out". They grew tonnes of okra, but found it died on the shelf. Mangoes were "OK", as were lychees. Pomegranates were "mixed".
Mr Mittal is not a quitter. He is giving the project, to which Bharti and Rothschild have committed $50m, one more year to achieve sales of $100m. At that level, profitability should be a cinch, he says. Today's losses, in any case, do not frighten him. "The dive is much shallower than in telecoms, where we would deep-dive never knowing if we would surface," he says.
A man who describes himself as "the product of economic reform", Mr Mittal has lost no time bending the ear of reform-minded policy makers to explain the infrastructural challenge of establishing a secure "cold chain" for fresh produce. He even drew a flow chart of the number of times his produce was left out in searing heat, on roadsides and runway tarmac, which was given to the government.
"The prime minister himself intervened and there have been lots of path-breaking decisions," he says, adding that in his 28-year career he has never seen any government so committed to transforming the business environment of a sector as this Congress-led government, elected with rural votes, is to improving the prospects for Indians dependent on agriculture for their livelihoods.
"There is some good that has come out of this because agriculture is not only good industry, it is also good politics," he says, pointing out that high-value horticulture employs 16 people per acre compared with one person for wheat and rice. "Everyone is willing to support this initiative. For our next shipment, the cargo will be allowed to go straight to the aircraft where customs will stamp it on the spot."
If high-value agriculture was to be the second leg of the Bharti group, infrastructure was to be the third. Here the disappointment is much more acute. Having played his part in ushering in an era of mass mobile communications, Mr Mittal set his heart on playing a leading part in the aviation revolution that is only just getting under way thanks to intense competition between a dozen new private airlines.
Mr Mittal wanted Bharti to turn its hand to massive airport construction projects, starting with Delhi and Mumbai, which account for about half of India's international traffic between them. He linked up with Singapore's Changi, considered one of the world's most impressive airport operators, and was a favourite to win the privatisation process now under way.
"Sometimes you become attached to the outcome of a project," he says. "I thought about airports for two and a half years. Our company said we needed to look at new businesses. I argued for it. Others were sceptical. Lots of time and money were spent on it. I personally believe after Shanghai and Beijing, Bombay and Delhi airports were the two best projects to get into worldwide."
If his group had won the bidding for Delhi and Mumbai, Mr Mittal says, Bharti could have gone on to build 29 airports across India, modernising a national network that looks and feels as if it last saw serious investment in the 1970s and consistently comes close to the bottom of passenger satisfaction surveys. But it was not to be. Last month, Changi withdrew at the last minute, after the deadline had passed.
"We tied up with Changi, having rejected two or three very illustrious names, and I have to say I was deeply disappointed. They have let us down badly," he says. "They felt their reputation would be tarnished, that is my sense. They worried about not meeting the 2010 deadline and the service/performance parameters. They felt it was beyond their control, even though we offered to underwrite all penalties."
Mr Mittal says Bharti is "off the infrastructure horse" for the moment, but it seems a fair bet he will compete hard for the contracts for Calcutta and Chennai airports when their turn comes round in the government's slow-moving attempt to privatise India's airports. He will not, however, team up with Changi again. "You can be pure but you cannot go out and kill a process."
In the meantime, his attention is shifting towards an even greater infrastructural challenge: India's railway stations.
Mr Mittal says he has spoken to Laloo Prasad Yadav, India's railways minister, about his dream to modernise the concourses and platforms that have changed little since the British Raj with the introduction of shopping malls and internet cafes, clean toilets and luggage trolleys.
"We want to do things that have never been tested before," he says., "The airport project was like that. The air space over railways is hugely attractive prime property. We can build 50 storey towers, shops, offices. I told Laloo, but he laughed and said it was too radical. But 10 years ago so too was airport privatisation. Railways will [happen] 10 years from now."
If Mr Mittal's plans to diversify his telecoms group fail - which somehow seems hard to imagine given his record, drive and connections - might he quit business altogether and follow his father, a Congress member of parliament, into politics? A couple of years ago, he predicted he would enter politics before his 50th birthday but now, with two years to go, he is no longer sure parliament is the answer.
"Politically, I'm very alive," he says, "but I'm sure I'm creating more change through what I am doing than if I were in parliament." India is starting to realise its potential as an economic force on the world stage and its entrepreneurial class, of which Mr Mittal is a poster boy, is venerated as never before. For the king of Indian telecoms, despite his recent setbacks, these are the very best of times.
Under syndication arrangement with FE

 

 
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