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Stress in the Telecom Sector

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October 30, 2017

What is the issue?

Telecom sector in India is currently going through its roughest patch since mobile connectivity began.

What are the developments in the industry?

  • Operators have bid for nearly 5-lakh crores to buy spectrum.
  • This is in addition to the annual levies accounting for almost 30% of their revenues – causing great financial stress & debt.
  • The entry of Reliance Jio, which has disrupted the market with low-cost data services, increased the industry’s woes.
  • Consequently, a number of operators like Reliance Communications and Tata Teleservices have been forced to exit.
  • The crisis has also severely impacted investors, lenders, partners and vendors of these telecom companies.
  • While the impact on subscribers has been limited thanks to mobile number portability, it has been hard on employees.

How has it impacted Jobs?

  • In the last year alone over 10,000 jobs have been lost due to cost cutting measures by the telcos.
  • The situation is expected to worsen in the next 6 to 12 months as more tele-operators are facing an uncertain future.
  • For those losing jobs, the hiring scenario in other employment-heavy sectors like IT and e-commerce is currently bleak.
  • While those in marketing or sales can move to sectors such as FMCG, those on the technical side could be left in the lurch.
  • Ironically, all this is happening at a time when the Indian telecom sector is at the cusp of a major data revolution.

Will it impact the envisioned Data Revolution?

  • As only 40% of the country’s population has internet access, there is a huge demand for telecom services going forward.
  • Telecom operators will have to invest heavily in rolling out 4G networks for which capital and human resources will be required.
  • But this can become a reality only if some immediate steps are taken both by the industry and the Centre.

What is the way ahead?

  • Forced expensive bidding have puts operators in a financial mess, which calls for rationalising spectrum pricing.
  • Also, as big investments are needed in the sector, the annual levies need to be brought down drastically.
  • Exits and mergers need to get easier so that strong players are able to absorb weaker ones without losing asserts.
  • Operators too should start creating new revenue stream as the days of offering plain voice telephony services are over.
  • The demand for data services is set to expand rapidly in the coming years which providers an opportunity to revive the sector.

 

Source: Business Line

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