August 3, 2000

The Economic Times

Bharti takes on new look for new economy
Our New Delhi Bureau

THE MITTALS-PROMOTED Bharti group on Wednesday announced its first major group restructuring aimed at providing greater focus to its growing range of business portfolio.

The Rs 770-crore telecom group, which has its footprints in nearly all new economy and telecom services sector — basic services, cellular services, VSAT, telecom manufacturing, Internet and proposed long-distance and submarine cable, has demerged its telecom manufacturing business from the telecom services business into a new company, Bharti Teletech.

All the projects have now been placed under three holding firms — Bharti Teletech, Bharti Telecom and Bharti Global — which will be owned by Bharti Enterprises, a closely held company that will serve as the banner company for the entire group.

Bharti Teletech will serve as the holding company for the groups telecom manufacturing and marketing business; Bharti Global for all overseas and software operations while all telecom services have been grouped under Bharti Telecom. The newly formed Bharti Foundation and Bharti Healthcare have so far been kept under Bharti Enterprise.

Under this demerger exercise, the group has worked out a swap ratio of three shares of Bharti Teletech for 10 shares of Bharti Telecom to separate the two businesses.

Rakesh Mittal has been appointed as the vice-chairman and the managing director of Bharti Teletech. He would only have an executive role in Bharti Teletech, though he will continue to be on board of all other firms in a non-executive capacity.

Sunil Mittal, who has been the executive chairman for all Bharti businesses so far, also announced that he would no longer be playing an executive role in Bharti Teletech and Bharti Global, the two non-telecom services businesses in the group.

In the corporate structure there is a layer of presidents that have been added between the CEOs of individual businesses and the managing director, Sunil Mittal, who would now be supported by two joint managing directors, Akhil Gupta and Rajan Mittal.

This move, said Mittal, would provide better corporate focus and ensure better corporate governance in the group.

``At present the telecom manufacturing business constitutes about 20 per cent of the turnover of the entire group. We believe that this segment would continue to be over 15 per cent of the groups turnover in future’’ said Mittal.

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The Hindustan Times

August 3, 2000

Talking to reporters here, chairman and group managing director Sunil Mittal described the entire exercise as "a high growth restructuring aimed at instituting total operational freedom with corporate control."

The company has finetuned its orientation and demerged the manufacturing unit into a separate arm, Bharti Teletech. It has decided to issue fresh three shares of Bharti Teletech for every 10 shares of Bharti Telecom, the services wing.

Following the changes, Bharti Telecom will be the services arm with at least nine subsidiaries under its ambit. These will include three new divisions — domestic long distance, infrastructure development, broadband services under a new network business line.

Bharti Teletech will be the manufacturing arm and will have under its fold the telephone instruments and telecom duct factories. The entire manufacturing operations will be headed by vice-chairman and MD Rajan Mittal.

Services constitute about 80 per cent of the total turnover of Rs 770 crore for 1999-2000 while manufacturing generates between 15 per cent to 20 per cent.

The third entity Bharti Global will be the international operations arm of the company with Telecom Seychelles Ltd and software company Bharti Telesoft Ltd (BTSL).

To lay $170 m undersea cable

Bharti Enterprises has announced an aggressive investment plan promising more acquisitions in telecom services, an ambitious $170 million undersea fibre optic cable project from Chennai to Singapore and plans for listing on the domestic and overseas bourses by March 2001.

The company is also looking at expanding its basic telecom service network by getting into Delhi, Haryana and Karnataka and also acquire more cellular projects, albeit at the "right price".

Sunil Mittal, CMD, said that four group companies including Bharti Televentures (services), Bharti Teletech (manufacturing), Bharti Telesoft (software) and the internet services arm Bharti BT Interent Ltd (BBIL) would be listed on stock exchanges. "Listing in India is an absolute must and is part of the expansion and restructuring plans",

Mittal added. It is expected that Bharti Televentures would go in for a $200 million ADR issue while the other three companies would be listed on domestic bourses.

Bharti has envisaged an additional investment to the tune of Rs 3,500 crore for funding new operations like national long distance operations (NLDO), the Chennai-Singapore link and acquisitions.

For the NLDO, the group plans to invest Rs 2,000 crore and is in talks with Vivendi of France and British Telecom for a joint venture. Mittal said the group plans to acquire cellular projects on a Pan-Indian basis and had allocated Rs 500 to 700 crore for this purpose.

The company is finalising the submarine cable foray between Chennai and Singapore which may cost between $150 to 170 million and is in talks with Singtel and other European and US operators for partnerships.

On the domestic front, the company has plans of laying 30,000 kilometres of optic fibre cable all over the country. The company is also planning to provide ESOP within a months time to all employees.

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The Financiaal Express

August 3, 2000

Certainly, he is showing vision. Deftly untangling the fibre-optic skeins of a Rs 770-crore New Economy enterprise, and dexterously weaving them into a tightly-knit corporate fabric, Sunil Bharti Mittal is finally bringing clarity and cohesion to his ``Himalaya to Indian Ocean'' e-mpire. It's giga-good news for Bharti Enterprises' customers, business partners, top management, employees, and shareholders-both existing and to-be-born. For driving the restructuring is an avowed passion to drill down lines of ``operational freedom'' and throw up beams of ``linear vision''. Each business head or functional head can now cleave right through the chain of command and effect interventions that make sense-without hurting cross-divisional sensibilities. Despite the diaspora of diversifications, Mittal is also finally clustering the cores of competence.

Quite clearly, the restructuring is designed to ensure that identical businesses are run along similar lines and that Mittal's functional satraps are on standby to serve the best interests of the entire group. Watch how the organisation tree gets pruned and primed for growth. The group is hiving off its telecom services (Bharti Telecom) and manufacturing (Bharti Teletech) operations into separate companies. Overseas ventures and software development business are being delinked. Bharti Telecom's investments in manufacturing operations stand transferred to Bharti Teletech. Bharti Telecom, Bharti Teletech, and Bharti BT Internet will list on bourses-first national, then global. And through it all, Sunil Bharti Mittal will preside as Chairman and Group Managing Director of Bharti Enterprises and all group companies. The secret mantra of change management is to leave the basics unchanged.

Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.

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The Asian Age

August 3, 2000

Bharti’s 3-way synergy split to gain tech edge

The group will now have three different companies to look after separate segments, which will be under the Bharti Enterprise. Bharti Telecom, Bharti Teletech and Bharti Global, will look after telecom, manufacturing and marketing and international operations respectively.

The international businesses of the company have been de-linked. Bharti Global will now be the lead company for both its international telecom service company, Telecom Seychelles Ltd, and its software arm, Bharti Telesoft Ltd.

"Bharti Telecom, the group company holding stakes in the operating companies through its subsidiaries Bharti Televentures and Bharti Telespatial. will become the lead engine to drive all telecom services. The service operations of the company will be restructured under three business lines mobility (for cellular operations), basic service (for fixed and wireless services) and networks (for broadband services, domestic long distance, V-sat and infrastructure development).

A president will head each business line to whom all the CEOs of the service companies will report," said Sunil Bharti Mittal chairman and MD Bharti Enterprise. The company also announced the de-merger of its manufacturing and service operations with separation of Bharti Telecom and Bharti Teletech. Bharti Telecom’s investments in manufacturing operations will stand transferred to Bharti Teletech.

The company has worked out a swap ratio of three shares of Bharti Teletech for 10 shares of Bharti Telecom to effect the separation of the businesses. Consequent to the de-merger, Bharti Teletech will consolidate its telecom terminal operations through an operating unit while the telecom ducts business will continue to be vested with Bharti Duraline Ltd in which it will hold 50 per cent stake along with Duraline of the US.

In the service operations there will be a new group structure which will have two joint managing directors, an apex team of corporate directors constituted, companies grouped around business lines to be headed by the president and business lines to have linear business focus.

The impetus of Bharti’s creation of the unique structure for effectively managing technological developments has been provided by its recent acquisitions in Karnataka and Andhra Pradesh.

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Business Standard

August 3, 2000

Our Corporate Bureau in New Delhi

The Rs 770 crore Bharti Enterprise has embarked on a major restructuring plan to separate its services business from manufacturing.

"The regulatory and technological changes in communications has forced us to focus in each segment of Bharti Enterprise," Sunil Mittal, chairman and managing director of the company said while addressing a press conference yesterday.

Mittal also announced to offer employees stock options to 3,500 Bharti Group employees within next one month.

As per the new structure the Bharti Telecom would now concentrate only on services part while Bharti Teletech would look after manufacturing and marketing. While Bharti Telecom’s investments in the manufacturing operations will stand transferred to Bharti Teletech, the company has worked out a swap ratio of three shares of Bharti Teletech for 10 shares of Bharti Telecom, Mittal said.

Almost 80 per cent of the revenue of the group comes from the services which includes Bharti’s cellular, basic, Internet, and VSAT. The manufacturing, which contributes 20 per cent of the group’s turnover, has in it the manufacturing of the telecom peripherals like telephone sets, and cable ducts.

The service operations of the company will be restructured under the three business lines mobility (cellular), basic services, and networks.

"Looking at ongoing trends of broadbanding we have created the new division of networks which will have three divisions namely Broadband services, domestic long distance and infrastructure development," Mittal said.

The group has also delinked its international businesses. Bharti Global will now be the lead company for both its international telecom services company Telecom Seychelles and Bharti Telesoft.

Bharti Enterprise is looking for Rs 3,500 crore of investment over next 12 months in the new ventures including DLD, basic services and submarine cable. Talking about the retirement of the loans Akhil Gupta, joint managing director, Bharti Telecom said that within next 3 to 4 years the company should start repayment of the loans which should be over by 6 to 7 years.

The group has also plans to list Bharti Televentures within this financial year to be followed by listing of Bharti Telesoft , Bharti-BT Internet, and Bharti Teletech.

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The Times of India

August 3, 2000

The restructuring, among other things, will make it easier for Bharti to divest stake in some companies and help raise around Rs 3,500 crore for its new projects, particularly domestic long distance (DLD) services which alone needs around Rs 2,000 crore.

Bharti Televentures, one of the two subsidiaries under Bharti Telecom, will be listed this fiscal, followed by Bharti BT Internet and Bharti Teletech next year. ``We plan to raise around $ 250 million (Rs 1,000 crore) through Televentures,'' said Bharti CMD Sunil Mittal.

Bharti is also close to finalising investment of around Rs 700 crore in sinking submarine cable linking Chennai and Singapore. Another major fall out of the restructuring would be to empower a large number of officials at Bharti. Mittal said the new group structure for service operations would have two joint managing directors and companies grouped around these business lines would be headed by presidents.

Manufacturing operations, on the other hand, would be headed by vice-chairman and MD. Besides, there would be an apex team of corporate directors to guide the group in areas like projects, corporate affairs, regulation and marketing.

The restructuring is expected to remove the corporate clutter which Bharati got into during the past few years of rapid expansion and bringing to fore a large team of officials who remained behind the scenes while Mittal, by and large, became the sole face of Bharti Enterprises. Mittal himself has often maintained in his dealings with the media that over time he would prefer to keep off micro level operations of group companies and leave that to his CEOs and presidents.

Bharti Enterprises recorded Rs 770 crore in sales during 1999-2000 and is slated to go beyond Rs 1,000 crore this year. Roughly, just 20 per cent of the group's revenues accrue from manufacturing telecom products. Mittal said manufacturing would continue to have 15-20 per cent share in the group's over all revenues. He said Bharti would continue to make `life-style' telecom products and ruled out any possibility of manufacturing core equipment.

Bharti's interests range from providing phone services like cellular (AirTel), basic, Internet, V- SAT to healthcare and telecom software. Over the past 25 years, the company has grown by entering into strong alliances with overseas partners like British Telecom, Siemens, Duraline and Intel.