Profile: Providence Equity Partners' Bis Subramanian

Working on investments in the telecom and media industry is something of a dream job for Bis Subramanian, managing director of Providence Equity Partners' New Dehli office. "Because of my background, I have always been interested in this sectors," he says. "I find it very fulfilling and intellectually stimulating."

Subramanian's roots are in tech. A native of India's southern Tamil Nadu region, his fascination with technology goes back to his days when he studied for a BA in electrical engineering at the Indian institute of Technology in Chennai, a city which, along with Bangalore, has become something of a hub for India's high-tech industries. From there he continued his studies at the University of California and soon after got his first job as an engineer with Intel in Silicon Valley.

Three years on, Subramanian decided it was the business side of the industry that fascinated him more, completed an MBA and started work at Credit Suisse and McKinsey & Company. He ended up as an investment banker in London with Morgan Stanley and it was there, in 2000, that he crossed paths with Providence. The deal in question was Providence's sale of a 29.7% stake in First Telecom Investment to Scotland's Atlantic Telecom.

The private equity firm had only opened its London office one year earlier and was in hiring mode. Given Subramanian's background, the fit was clear. "I had a good experience working with them, I liked what they were doing, and the people there, so I made the switch," he says.

Post bubble

It was an interesting time to join. The dotcom years were coming to an end and Subramanian's sector was changing. "During the dotcom bubble there had been a lot of investment in very early-stage companies that had been enabling the telecom services companies," he recalls. "But after the bubble burst the environment shifted and it affected how we were investing. Our focus gradually shifted from providing young companies with growth capital to buyouts of large established companies."

One of the most significant investments Subramanian made during his time in London was in Germany's largest cable TV operator, Kabel Deutschland. Providence, together with Goldman Sachs and Apax Partners acquired the company from Deutsche Telekom. Their strategy, as has been with many similar investments over the past decade, was to bring the company into the digital age.

"Our approach was to invest a lot of money into the network," explains Subramanian. "We essentially changed it from a single product analogue video company to a triple-play company which included digital video, telephony and broadband."

When Providence sold its remaining 22% stake in the German cable in July 2011, it closed the book on what was then one of the more lucrative deals in private-equity history - having generated a more than 4x money multiple on an eight-year investment, the firm walked away with in excess of $3 billion.

In 2007, Subramanian had the chance to take his experience into new territory. Providence was looking to expand into Asia and opened offices in Hong Kong and India. Subramanian was charged with setting up the India office. "I had been with the firm long enough and I was the only Indian partner, in fact I was the only Indian employee," he says. "I thought it was a very interesting challenge both to come back to the country where I grew up and also to set up a new entrepreneurial venture within the firm, establishing a brand new business."

Asked to choose a location for the office, it came down to the country's three private equity hubs: Mumbai, New Delhi and Bangalore. He eventually settled on New Delhi in the north, which already had the infrastructure in place and a wealth of telecom and media companies to target.

"What I found when I came into India was that growth was just beginning to happen and it was going to increase rapidly. It was a very heady environment to come into," explains Subramanian, "Given that India has come from very low levels of economic activity there was much more scope for growth in this sector."

Avoiding the hype

He likens the investment environment circa 2007 to the dotcom days in Europe, with optimism verging on irrational exuberance as everyone made plans to create industry titans. Having already seen a bubble burst in Silicon Valley, Providence's early days in India were cautious and disciplined. At the same time, fewer entrepreneurs were - indeed, still are - willing to giving up equity at reasonable valuations, which created a disconnect when trying to reach a deal.

As a result, Subramanian says the number of potential investments that actually ended up being transacted were lower. He cites Hathway Cable & Datacom as one of his most significant deals during the six-year period. Providence invested INR3.58 billion (US$71.36 million) with Macquarie Bank for a 17.3% stake in the company last year.

"There were a lot of parallels to the investments we made in the German cable TV company, in the sense that we were taking a company that provides analogue TV and transforming it into a company that provides digital TV , broadband and telephony," says Subramanian. "There were some regulatory changes that were going to make things very interesting for Hathway, to improve its economics and grasp the opportunity for digitalization."

He describes the global trend of TV digitalization as a key area of growth in the telecom and media space. It has already starting to roll out in India, with the four biggest cities converting to digital in November 2012. Phase two is scheduled for this year and 38 cities, each with a population of more than one million, will convert. The rest of the country will follow suit over the next two years.

Subramanian reflects that there is there is look to forward to in India, predicting that the macro trends that applied in 2007 are still applicable today. "It is huge country and 50% of the population is below the age of 25," he says. "These young people are different from a generation ago - they are knowledgeable, they are aspirational and more willing to spend."
The time to invest, he adds, is now.

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