'India's a high-risk, high-reward market' : MTS President

'India's a high-risk, high-reward market' 19 Dec 2009, 0013 hrs IST, Rashmi Pratap, ET Bureau

Mikhail Shamolin is the man behind Russia’s largest telecom operator Mobile TeleSystems (MTS). The MTS president is also on the board of Sistema Mikhail Shamolin, CEO, MTS Shyam Teleservices (SSTL), which is trying to alter the dynamics of the great Indian tariff war by offering calls at half-a-paisa per second. Mr Shamolin describes India as a ‘high-risk, high-reward’ market and foresees consolidation in the telecom sector. In an interview with ET , he talks about acquisitions, branding, bullishness on CDMA technology and more. Excerpts: How do you think running a business in India is different from running it in Russia? I think, India is fairly competitive, more competitive than Russia. I think, India is a very entrepreneurial, vibrant, dynamic market with lots of energy, lots of potential, all at the same time. It is a ‘high-risk, high-reward’ type of market. What is Sistema doing to promote brand MTS in India? Besides the general logo, look and the feel that MTS India has taken from the bigger MTS, the particular brand strategy is adapted to the Indian market. On the one hand, it supports the affordable brand and, on the other hand, it is a high quality look and feel brand. The strategy we are pursuing with CDMA data services is more upper-end than the poor man’s phone. It is an affordable brand with good execution. Indian operators are increasingly looking at Africas and the Middle-East to expand operations. What about MTS? Not at the moment. We don’t really find many markets with low levels of penetration, low levels of competition and big population. The reason India is interesting because it is the only market in the world with the potential of 800 million people not having a mobile phone and still growing. If you want to be in Africa, to be able to have a market comparable to India, you have to be pretty much in all the African countries, which is not achievable in the short-to medium-term. So India is the best out of the growing markets. Why are you so bullish on the CDMA technology? Tatas and Reliance Communications have now opted for GSM as well. There are a couple of reasons. One, both CDMA and GSM are coming together in the LTE (long-term evolution, successor to 3G) standard. So, in a couple of years, there won’t be much difference. Secondly, spectrum in CDMA’s 800 MHz band is better for cost and coverage than spectrum (in the 1,800 MHz band) that some of the new players are using. Thirdly, CDMA is good for data. The biggest differentiator remain the handsets. Soon handsets will become very generic and software will be more important. So there won’t be much difference. Given an option, will you go for the GSM platform in India, like the Tatas have done? No, I don’t think so. And that’s because of the reasons given earlier. Isn’t profitability a big issue for late entrants like Sistema? Well, profitability is a big issue for the market itself. There is high risk, but the potential is high reward. Indian market fits the Sistema profile. It is a venture capital type of investment . The upside is 800 million potential customers. Do you expect consolidation in the sector? I think consolidation is necessary. I don’t think the market can be healthy with the number of competitors that currently exist because it’s not a social support system; it’s business. I think the government should push the legislation forward to allow M&As as soon as possible. That will be better for the industry. If it is allowed, will you look at any acquisitions? I think it’s still early. We are thinking about it, but we will have to see how everything plays out. There are no firm plans for now.