Wireless Wonder: India's Sunil Mittal (cont.)

By Clay Chandler, Fortune senior writer

Desperate for another breakthrough, Mittal scoured markets in Japan and South Korea, eventually landing at a trade fair in Taiwan, where he discovered an extraordinary device: the touch-tone phone. In those days Indians were forced to make do with clunky rotary phones, if they were lucky enough to own a phone at all. One look at the push-button version, says Mittal, and "I knew instantly this was the big one." Within days he had signed a contract with a Taiwanese supplier.

Months later he was selling the gadgets to customers in India under the German-sounding brand name Mittbrau (short for Mittal brothers). But the process took some fancy footwork. Touch-tone phones weren't on the government's list of products approved for import. So Mittal disassembled the phones in Taiwan, shipped the components through Kolkata, Delhi and Mumbai, and reassembled them in Ludhiana.

That success, too, was blunted by a shift in government policy. When regulators decided touch-tone phones should be made in India, they parceled out licenses to 52 Indian firms, relegating Bharti to second-tier status behind the larger, better-connected industrial groups. But phones weren't a priority for the conglomerates, Mittal explains, and Bharti's venture flourished, diversifying into fax machines, answering machines and cordless phones. Today Bharti is India's largest phone manufacturer and the only one of the 52 licensees still in the business.

By 1992, Mittal had set his sights on the next big thing. A 1991 balance-of-payments crisis had forced the government to loosen regulations and open India's markets. As part of that effort, it was taking bids for licenses to operate India's first mobile-phone networks. Mittal didn't know much about the technology. But he knew enough about the aspirations of Indian consumers to sense that "this was the bet of a lifetime." Turning management of the factories over to his brothers Rakesh and Rajan, Mittal moved to London, where he spent lavishly on outside experts to educate him on the workings of the mobile-phone industry and to assemble a world-class tender offer.

Bharti won licenses in India's four largest cities, but over the next two years the victory was pared back to just Delhi after a series of legal challenges by rejected rivals. But the setback proved a blessing. Running mobile-phone service in India proved far more costly than anyone imagined. Bharti's initial estimate of $25 million to build a network in Delhi was too low by a factor of four. Says Mittal: "People told me this was a business for companies with deep pockets. Had we known how deep, we'd never have tried it. We begged, we borrowed, we stole, but we put the project together fast."

When the government invited bids for mobile licenses in cities across India, Bharti sat on the sidelines, unwilling to match the sky-high offers of competitors. Later, when rivals who overpaid went bust, it picked up assets on the cheap. "Banker after banker told us how silly we were not to bid higher," recalls Mittal. "But lo and behold, in two or three years the other companies started falling like ninepins. They couldn't even pay the licensing fee. They struggled, and we were ready."

Then, in 2002, as Bharti plowed resources into bringing its assets up to speed, formidable players entered the fray. Bharti's stock plunged to less than half its IPO price early in the year. "The question on everybody's lips - bureaucrats, politicians, the media - wasn't if we'd collapse, but when."

These days, most analysts think Bharti's mobile business is out of the woods. Mittal says outsourcing agreements help Bharti take blistering growth in stride. Sales, earnings and share price now climb in tandem with new subscriptions. Technology specialists, who once struggled to keep pace with expansion, have the latitude to explore new ideas for broadening and deepening the content Bharti offers its subscribers. In November, for example, Bharti announced an agreement with Google (Charts) that enables Bharti wireless customers to use the California firm's technology to search the Web.

Mittal, who has vowed to step back from day-to-day management of the mobile operation soon after he turns 50 in October, is already shifting focus. Bharti Airtel is "running on its own steam now," he says. "It's come to a point where, if I interfere, I'll only create trouble." He is already devoting more time to charitable activities and later this year will take on a high-profile role as head of the Confederation of Indian Industry, the nation's leading business lobby. Inside the company his priority is the new retailing tie-up with Wal-Mart, an endeavor he says will have a "transformational" impact on Indian life.

That venture will put Mittal's entrepreneurial skills to the test. India's restrictions on foreign retailers reflect fears that global giants will run roughshod over mom-and-pop stores. Wal-Mart, a lightning rod for criticism in its home market, has stumbled in several efforts to expand overseas.

Bharti has no prior experience in retail. And as India's rising middle class clamors for a more modern shopping experience, the large Indian conglomerates are moving in. For Mittal, the challenge seems too big to resist. "As an entrepreneur," he says, "I need to scale a few more peaks before I hang it up."

Reporter Associate Joan L. Levinstein contributed to this article.

An earlier version of this story incorrectly stated that the Indian flag bears an image of a hand loom. A hand loom was on the flag of the Indian National Congress, the party that led India to independence, but it was replaced by the Ashoka Chakra, a wheel-like symbol of dharma, in 1947. Fortune regrets the mistake.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.