Wireless Wonder: India's Sunil Mittal (cont.)
Western companies, by contrast, have proven ability to work for large mobile providers and can render services locally through Indian subsidiaries. "IBM has thousands of people in India who work only on my job. Indians run it, but they're governed by the IBM structure, under the command and control of IBM's global experts."
Mittal's enthusiasm for foreign partnerships is unusual in India, a country that, since shaking off the yoke of British colonialism, has remained deeply suspicious of outside meddling in its economy. India's wariness is reflected in the fact that it received $7 billion in foreign direct investment last year, compared with $72 billion that flowed to China.
Mittal, however, deems partnerships not merely useful but "the core of my strategy." And he ascribes much of his success to his refusal to tie up with other Indian firms. "It's very hard for two Indians to partner well," he says.
Early in his career, Mittal, 49, struck profitable alliances with manufacturers from Japan, Taiwan and Germany. More recently he launched a joint venture with France's AXA (Charts) to sell life insurance in India, and another with the Rothschild family to export fresh fruit and vegetables grown in India to supermarkets in Europe.
Mittal has also courted foreign investors. In 1999 he sold an 18 percent stake in Bharti to Warburg Pincus for $294 million. (Warburg unloaded the last of that stake in 2005, reaping a net gain of $1.9 billion.) SingTel, Singapore's state-owned telecommunications firm, owns 31 percent of Bharti Airtel, while Britain's Vodafone purchased a 10 percent stake in 2005. Although Mittal says he isn't interested in further diluting his family's controlling 26 percent stake in Bharti Enterprises, the parent of Bharti Airtel, he was a vocal proponent of the government's decision to raise the ceiling on foreign investment in the telecommunications sector from 49 percent to 74 percent.
Now Mittal is forging his most audacious foreign partnership yet. In November he announced that Bharti Enterprises will team with Wal-Mart (Charts) to transform India's underdeveloped retail market. Terms of the alliance, structured to end-run Indian restrictions barring foreign investment in any retail operation offering customers more than one brand, grant Bharti full ownership of stores selling directly to Indian consumers under the Wal-Mart name.
Bharti and Wal-Mart will form a separate joint venture to take on back-end activities in which overseas investment is permitted, including wholesale, logistics, supply-chain management and distribution. The companies haven't disclosed who will own how much of the joint venture. But Mittal says he will open hundreds of stores over the next five years in formats ranging from supercenter to neighborhood market, and he predicts investment in the venture will exceed $1 billion. Wal-Mart spokeswoman Elizabeth Keck hails the partnership as a "perfect match." Bharti, she says, "excels at meeting customer needs in India, while Wal-Mart excels in logistics, sourcing and supply-chain management."
Finding his niche
An affinity for foreign allies is consistent with Mittal's formative experiences as a first-generation entrepreneur in the heyday of what was known as the "license raj." The era was so named for the government's policy of closing India's economy to foreign competition while doling out exclusive rights to produce essential goods and services to politically powerful industrial dynasties like the Tatas and Birlas.
Unlike the scions of those great families, Mittal wasn't born to wealth. He was raised in Ludhiana, a manufacturing hub in Punjab, as the middle son of a Congress Party politician. He founded Bharti in 1976 at the age of 18, after graduating from Punjab University, with $1,500 borrowed from his father. At first he made crankshafts for local bicycle manufacturers. Within three years he had set up two more plants, one that turned out yarn and the other stainless-steel sheets used for surgical utensils.
Despite his success, it was clear to Mittal that these ventures would never match the size of his ambitions. So in 1980 he sold the bicycle-parts and yarn factories and decamped to Mumbai, where he reinvented himself as a trader, crisscrossing the nation by train in search of customers for imported stainless steel, brass, plastics and zip fasteners. Business was good, but Mittal's first real break came in 1982 when he parlayed a chance encounter with a salesman from Suzuki Motors into a role as the exclusive India agent for the Japanese manufacturer's electric-power generators.
In Suzuki's home market, generators were a sideline, used mainly to power ice cream vans. But Mittal knew that in Indian cities like Ludhiana, where power outages were part of daily life, generators would be snapped up by ordinary households. Sales boomed. Within two years Mittal had established a national distribution network with offices in four cities.
But then the big boys muscled in. In 1984, with no warning, bureaucrats in New Delhi announced they had awarded licenses to manufacture generators to Sriram and Birla, two of India's largest industrial groups. Never mind that licensee factories wouldn't be up and running for several years. The import of foreign generators was immediately banned. "It was all gone, just like that," recalls Mittal, snapping his fingers.