Asim Ghosh has retired from Vodafone Essar after being at the helm for 10 years, two years after Vodafone acquired Hutchison shares. He will continue as a non-executive member on the board of the company and his plans for the future include reading, golf, photography and travel.

This is the man who started off with a single license in Mumbai city as managing director of Hutchison Max Touch to making Vodafone Essar into the third largest mobile operator in the country. Characteristically media-shy, 61-year-old Ghosh has for the first time talked openly about FDI, 3G and India’s potential for mobile growth but his comments to CNBC-TV18 and Business Standard on Bharti Airtel’s Sunil Mittal are what caught our attention:

Sold Equity At The Right Time

Ghosh said that Mittal did a “brilliant job of seizing the moment and pulling victory from the jaws of defeat” when technology (CDMA versus GSM) was still being debated in the sector. In 2000, telecom was still considered infrastructure and policy changes were often, making analysts and investors suspicious of long term investments.

But Bharti still bagged a major promoter like Singtel in 2001, who bought a 28 percent stake in the telco for $400 million. Singtel subsequently upped it to 31 percent in 2005. Around the same time, Bharti also went in for an IPO to fund its ambitious expansion plans. These two moves were, as Ghosh put it, “in the nick of time” as the economy went south and the telecom industry plunged into disarray, with court cases over interconnect charges and rising cellular license costs.

Why Hutch Could Not Raise Money

Mittal also got Vodafone to acquire a 10% stake in Bharti in 2005, in a spry move just weeks after the government announced a rise in cap from 49% to 74% in the sector. In comparison, Ghosh’s own attempts at raising liquidity from Hutchison Essar’s Indian shareholders seem to have failed him throughout his tenure at Vodafone Essar.

Why was he unable to raise money? Ghosh said that while Mittal, as an Indian, could dilute upto the FDI cap, Hutchison couldn’t dilute adequately because there wasn’t enough local capital available. But the same sources that Mittal had were also available to Ghosh, so what really prevented Hutch from raising the funds? Probably, the shareholders.

Critisizing the FDI policy which prevented foreign shareholders from raising local capital after entering India, Ghosh said that it was why Vodafone Essar was unable to beat Bharti Airtel. It only depended on its initial capital, which was insufficient compared to the growth the country demanded.

Calling it a tough race and a tough regulatory ride, Ghosh has said that the government’s restrictions on a foreign owner of a telco (versus an Indian) have been manufactured for commercial reasons. We agree with his dissonance on the government’s inconsistency over policy matters, but what are these commercial reasons, exactly?

Managing Shareholders
Ghosh also commended Mittal’s skills in maintaining relationships with shareholders, because of which Mittal could mobilize capital anytime. Calling it the single largest achievement of the Bharti Group, he said that the harmonious management of the shareholders gave it a strategic advantage in a capital-intensive sector such as telecom.
He adviced new players who entered when the market was still up and have been carried forward by their organisational momentum to utilise their capital wisely. Ghosh said the high costs of new 3G phones and equipment and the limited number of high-end new subscribers makes its business case inferior to 2G.

Much more from Ghosh at Moneycontrol and Business Standard.


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