"Europe is flat; That is why it is critical to be present in India"

Sigve Brekke, the Gurgaon-based Managing Director of Uninor, the joint telecom venture between Telenor of Norway and Unitech in India, has an unusual, unorthodox style. But it has worked well for his company.  Excerpts from an exhaustive interview with Sunny Sen:

Is the way you work in India different from the way Telenor does globally?
Much of what I do is a part of the business culture of Telenor. But the way I do them is probably a little bit different. Telenor has a set of values and principles, such as: 'Be respectful', 'Keep promises', 'Be Passionate about Business', 'Keep Things Simple', etc. The way these are implemented may be different for different people, or differently in different cultures.

Even so, I think people tend to make too much of cultural differences. The more I work in different countries the more I feel human beings are just human beings. When I went to Thailand as CEO of Telenor's venture there, I found the CEO had his own lift. He was never found sitting in the canteen with other employees. And I asked why on earth this is so. Why is the CEO always required to wear a suit and tie? The employees said: 'You cannot sit with us. You cannot leave your office. A CEO is supposed to be a little unapproachable.' I didn't say anything. But I started wearing jeans, I closed the lift, I closed my office room (and sat among the other employees?). People appreciated it.

It was the same at Uninor. Many people we hired from different companies were uncomfortable without a room of their own. But I said, 'If you want to work here, you have to work like this'. At the end of the day, people like to be treated as human beings; people like to be emotionally touched. This is not culturally dependant.

Is this something you learnt from your days as a politician? You were once a minister in the Norwegian government.
Are there differences between politics and business? My answer is 'yes'. But both have to sell messages. The difference between selling a political message and a business message is not that big. Politicians need to touch the mass market voters. Business needs to do the same - touch people in organisations and acquire a mass customer base. This cannot be outsourced. You need to do it yourself. My feeling is that too many businesses are outsourcing this to marketing divisions and ad agencies.

Are you more of a businessman or more of a politician?
I will say that in both in business and politics you have a goal. I use tools to reach that goal. And the goals are different in politics and business. But the method you use, the tools you use can be quite similar. I am more of a 'goal getter'.

Has anybody called you too flamboyant?
No. If you have to do things I do, you need to be real. You need to connect emotionally to people. You need to like the job. I cannot come to Chennai and talk to people if I hate doing so. That doesn't work. You are just pretending. It's a show and it will soon be discovered. And this is not about me, this is about us. This is about Uninor. I am more of a coach. I coach people, trying to give people advice, trying to set business goals, and trying to set what the culture of the company should be like. And the only way I can do that, is by doing things myself. If I want Uninor to be a market driven company, then I need to be in the market myself.

What is the difference between India and other countries?
The mass market competition is more or less the same. So the market tactics, such as the distribution system we use, are more or less the same. The culture, the way we work, is more or less the same. The differences are two. First, the business model we have chosen. India is the only place where we have outsourced most of the things - call centres, IT, running the network, etc. In all other countries we do it ourselves in house. The other difference is that India is much more competitive. And I am not talking about the number of players in the market but also the way of working in India. I think you Indian guys are just more competitive. Everything is competitive.

You brought about a turnaround at DTAC (Telenor's Thailand venture) after taking over in 2002. How would you compare DTAC then to Uninor?
First let me talk of the similarities. In both places, I found a lack of clear direction. The first challenge was finding out what we wanted to be and finding the strategy for it. The second challenge was building the confidence of the employees; there was lack of winning spirit.  There was need for a very quick turnaround.

Basically we had to come up with a good strategy. My view is that if you have to come with a good external brand, you need to have very good internal culture. And the internal culture needs to build the external brand.

I am not criticising the previous MD. If you have a company which is struggling, the worst thing you can do is blame the management. I see many companies doing that. That creates even more problems. I say that we have very capable guys; we just have to have a clear focus of what we want to achieve. I make them feel that nobody is going to be blamed. We just have to adjust the direction. We have a very simple strategy and that's what we should do.

And what is that?
We focus on three points. First, we try to be the best in basic services, we stay away from value added services, STD and international calls. We want to be the best in local voice. We don't want post paid connections. Second, we want to be best in mass market distribution. It means we have to be present in all the mom-and-pop stores. We should not concentrate on the big distributors in the cities, but on these whom the market leaders are not concentrating. They concentrate on the big guys. We want to do it differently. So we have created a system where we have Uninor people visiting the mom-and-pop shops every second day. They are indirect employees, but we are paying their salaries. They get insurance from us, provident fund from us and they feel like they are part of Uninor. We have 6,500 of them. And we have 440,000 retailers. And third, we have to be low cost.

How long do you think this strategy will work?
The strategy will not work for us forever. But that is the strategy right now. India as a market is growing on basic services, meaning people are connecting on voice. People are not connecting on data services. And the size of the Indian mass market is so big that if you focus only on that you can do well, you can build up a market position. So if you are a guy who needs post paid connections, we say 'no'.

When I joined we were almost on the verge of coming out with post paid services. So when we built the strategy we did not focus on what we should do, we focused on what we should not do. We put aside a lot of projects, about 100 of them, and post paid was one of them. That helped us focus the company. And then we changed our marketing.

What is your product strategy now and how is it different from the early days?
Initially what we did wrong was to think about India as we do about other markets, like other Asia markets or Europe. For example, Thailand is a more segmented market. You need to have post paid, you need to have advanced value added services, you need to cover all the different age groups. We developed our India business model thinking the same way. But we learnt that India is much more competitive and the big guys are so big, that to make any difference here you cannot copy what they do.

Initially we got into the trap of copying the market leaders, of doing things similar to what Airtel and Vodafone do. And the other thing we learnt is that this is such a big market you do not need to go after everyone. You can woo only a certain segment. And that's when we decided that we will go for the mass market. And after we formulated the strategy I said forget about the business.

Weren't you part of the earlier India strategy which did not work?
Yes, I was and that is why I do not blame the management. I blame myself. I think we miscalculated. It took us only four months to come to the conclusion. First, in December 2009, we had launched in eight circles. And in May when the numbers we expected did not come --- the subscriber numbers and revenue numbers were disappointing. Then we started travelling in the various circles to see what was happening on the ground. And then it took us only a couple of months to come out with a new strategy.

Is India very important to Telenor?
It was a big bet that we took to be in India. We were heavily criticised. The analysts criticised us. The senior Telenor management, of which I am also a part thought that we could gain in India using our knowledge gleaned from our experience in other countries. So India for Telenor is not just another country, because we were already in 11 countries. The India foray was to prove that our operational model of going into growing markets can also work in a vast and competitive market like India. So when we were not getting what we wanted we had to put all our focus into turning this around. And then naturally you could have changed the CEO and put another one, but I thought that this is very important and I need to put myself and take charge of this. So I demoted myself and became my own boss, but at the same time continued to hold the responsibility of other countries. I just felt the responsibility, because I was the one who advised Telenor that we should be present in India.

With your licences cancelled, what are you doing next?
I have met the TRAI chairman four times since the verdict. The TRAI is only talking about the auction and we are giving our inputs. So we are spending a lot of time with TRAI. The other party is the telecom ministry; we are talking to Kapil Sibal and the telecom secretary. We think that the whole New Telecom Policy plan needs to come out. The regulatory issue should be clear. We are also talking to them about allowing us to continue to run our business. We have met the law minister, the corporate affairs minister and people in the prime minister's office. And we are trying to meet them at all levels.

What about an interim licence?
I don't know about that. There can be many outcomes. One is that Supreme Court is just extending the auction date. And they may say extend the operations. The other outcome is that they may just finish the outcome before June 2. That is another extreme. And there is something which is in between, where they give an extension of 100 days. I don't know what will happen.

The lawyers say that we have a chance to be heard in the review petition. We have brought in new arguments. They may make the SC relook at the case. They also say that the way the SC order is written, it may finish the auction within 4 months. We have a good case in asking the SC to clarify the timing.

You have already invested Rs 14,000 crore in India and a re-auction will only stretch your balance sheets further? Airtel spent Rs 12,000 crore on its 3G licences.
We cannot pay Rs 12,000 crore, no way. It has to be lower than that.

Why is India so critical to Telenor?
You need to look at Telenor's history. It has been a market leader in Norway. Then we decided that the market in Norway is small and we need to grow outside, and that growth would be in mobile in growth markets, not mature markets. That's why you see Telenor has all operations outside Scandinavia, either in Eastern Europe or in Asia. Telenor is staying away from small markets and advanced and developed market. We think we have competence in creating successful business in growth markets and that has been driving growth for Telenor for the past 15 years. That's how values have been created.

Now some growth markets are turning into mature markets, like Malaysia and Thailand today. The growth there is now much less. And then we have Pakistan and Bangladesh, where there is growth left. So if you look at Telenor today all the revenue growth of Telenor is coming from Asia, nothing from Europe any more. Europe is flat, nothing is coming from Europe any more. It is critical for us to be present in India.

European operators are really struggling with top line. How do you create bottom line growth when revenues are flat? You can do that once by cutting cost. But sooner or later you will need to have top line growth.

When will India stop growing in top line?
I guess from this point, it will take another three years. I think by then most people who can afford a phone in India will have one.

Then you see most of the operators are focusing on segmentation of the market. They will focus on different type of services and different type of segments and then data will come. And then you will try to maintain your growth by putting various things on mobile, like payment services, you will see mobile health and mobile education.

If there is so much uncertainty in the India market, is there any point in hanging around?
It depends on how long term your strategy is. Second, what do we mean by uncertainty? In all the countries including Norway, there is regulatory uncertainty. In Norway the regulator has come out and said it wants to help newcomers. So it wants Telenor to pay more, it is changing the game. In Hungary the regulator has suddenly started imposing some sort of revenue tax. In Thailand, now they do not allow any foreigner working in a company. In Bangladesh they have served us a huge audit claim. This is always there. That is the flipside of working in growth markets. This is what we feel we have the stomach to tolerate and the capability to manage. But of course up to a certain level only. We are not prepared for a cancellation of licences by the SC. That we were prepared for.

How is your parent company reacting to the cancellation?
Telenor is choked. This is the first time this has happened to Telenor in any of the countries where we are operating. They are shocked. But again what can we do? We can scream and shout, but Supreme Court is Supreme Courty. So we have to figure out to see what to do now.

Etisalat has decided to exit and we have decided to stay. But we will go into the auction with a rational mind. If will see if it is possible to pay the amount of money that the auction will end up with and still be profitable in this market, we will stay, and if it is not possible then we need to quit.

You are looking at creating a new company. You will have to transfer assets. The new company will be a debt laden company? How do you make a business case?

There are only three ways of doing that. One is that you reduce your estimated return, because you have to invest more. The other way of looking at it is there are upsides coming from these auctions. And the upsides are that I think there will be fewer players left after the auctions. One year back everyone talked about consolidation. And today Etisalat is gone, Videocon seems to be scaling down, Bahrain (Telecom) is gone, STel is gone and Loop is gone. Four guys have gone already. And it is very clear that a couple of other midterm players will also go away. So you look at it from a positive direction: there will be more rational competition after the auction. The price war will most probably be over; there will be more certainty around regulatory framework. And you can build that into a more optimistic business plan which will allow you to take on board more investment plan also..

But will you have to revise the targets of 2013 and 2015?
That depends on how much we have to pay in the auction.

If you have to pay the 3G base price...?
You may have to push back the targets by a couple of quarters. You may have to revise the targets; you may have to scale down costs. We have also asked for deferred payment because we feel that it is not fair to ask for all the money upfront, spread it out overtime. We have put the deferred payment option in the consultation papers. And that is what the incumbents got in 1998.

Will India be as profitable for you as the Nordic region after you become cash flow positive?
No, if you look at profitability in terms of your margins it will be less. But in terms of returns, as the volumes will be much higher, it will help our group's revenue growth. It will increase the group's actual profitability growth, but the margins will be less.

Do think that in 2-3 years India will be an important revenue contributor as well?
Yeah of course, it will be by far the biggest. If and when we are successful here this is going to be by far the biggest market. I had foreseen before we started operations in India that it will be Telenor's biggest market.

Are you also a contender for the position of Telenor's next CEO? Will you consider it?
I will consider it if they are willing to shift the headquarters to India (laughs). Frankly I never think about this. Not one day in my whole life I have thought about my future. I strongly believe that if you do your job well, the future takes care of itself.

I am not a career guy at all. I am the one who takes on challenges.

I am more hands-on than many CEOs, but there are many hands on CEO. A European study shows that most successful CEOs spend less than 60 per cent of their time in office. I spend more than 50 per cent of my time outside office. I think that is right.

When you came to India did you know that you will be able to turn Uninor's operations around so soon?
No absolutely not. This was a big risk, because this was a market where you don't get things easily. If you make a mistake here it is extremely difficult to recover. For example, in Tamil Nadu, Kerala and Karnataka, to change because we had a little bit bad start was more challenging than to start fresh. Ten per cent of the market is churning every month, that makes a 120 per cent churn in a year.

What was in your mind before you came to India?
What we do at Telenor is push distribution. Traditionally what telecom operators do is pull marketing, where they do a lot of lot TV commercials and they now have a fixed mind set when they go to the shop and buy the SIM. Our model is not that. Our model is to build a relationship with the retailer, it is very important as 50-60 per cent of the customers are confused.

*An earlier version of this story stated that Brekke is based in Chennai.  He is based in Gurgaon.