As we enter the next stage of revolution with 5G technology and rise in consolidation in telecom sector, experts predicts that more than a million jobs will be lost in the process in the next 12-18 months. Rajan S Mathews brings you a report
The Indian telecom market has more than a billion subscribers and the sector employs four million people directly and indirectly. As we are entering the next stage of evolution — 5G technology based services, and all that this revolution brings with it now, the industry seems to have got stuck between a rock and hard place.
Experts and analysts estimate that more than a million jobs will be lost in the process, directly and indirectly, in the next 12-18 months, with direct job losses pegged at around 30 per cent of this. Thereby adding to the woes for the sector and leading to a rise in the overall unemployment numbers in the country.
Any major changes in the ecosystem are bound to have a proportional impact on the economy and the country as a whole. The industry has invested over Rs 9 lakh crore, in the past two decades, but is now reeling under a staggering debt of Rs 4.5 lakh crore. For the next phase of expansion and roll-out, over Rs 2 lakh crore are required as an additional investment for innovation and infrastructure rollout to fulfill the Digital India vision.
Staff costs are pegged at around 5 per cent of revenues, not a small amount given that the sector employs more than two million people directly and almost two million indirectly making this sector one of the largest employers after manufacturing and agriculture.
The bulk of the debt has accumulated as the cost for spectrum acquisition, while the rest has gone into building out networks and introducing newer technologies and services. While sector revenues are less than Rs 2 lakh crore and falling, areas remaining for further cost cutting to survive the latest phase of hyper unsustainable competition, are also dwindling. The telecom companies are forced to now consolidate and merge operations to ensure survival.
Market watchers welcome the sector consolidation. Very few countries in the world have more than five telecommunications company and in a country where tariffs are amongst the lowest, fewer players to share revenue pie is always a welcome move. However, this consolidation is a forced one, and not driven by choice, making the negatives likely more than the positives.
The United Nations International labour Organisation (IlO), in its 2017 World Employment and Social Outlook report released earlier this year, estimates that Unemployment in India will increase from 17.7 million last year to 17.8 million in 2017 and 18 million next year. In percentage terms, unemployment rate will remain at 3.4 per cent in 2017-18.
This spells bad news for the Government that has much to lose if its ambitious Digital India and Skill India programmes, get adversely impacted. Given the extent to which they both depend on the telecom and technology sector, a considerable slowdown is bound to happen in both.
The telecom sector already faces some of the highest taxation rates (in the form of taxes and other levies) as compared to the rest of the world, while also offering one of the world’s lowest tariffs. The sector contributes around 4 per cent to gross domestic product (GDP), 7 per cent to foreign investment.
It’s not just job losses that we need to worry about post consolidation. With the reduced competition, an increase in tariffs cannot be far behind. And if consolidation fails to help the sector survive this period, then the lack of a robust telecom eco-system could severely damage the economic and social fabric of the country.
These job losses are considered inevitable given that the service providers are being forced to streamline their operations and minimise redundancies, ensuring absolutely no leakages in any aspect of the business, especially manpower.
At present, India’s telecom sector is in the midst of what is being referred to, as the worst phase of hyper-competition, for both voice and data services. Brought on by the advent of 4G technology based communications services, it comes barely a few years after the 2009-10 tariff war for voice services. The last round was bruising for all and saw almost six operators exit. The industry has had almost no time to recover, with the spectrum auctions following almost immediately, which were followed by renewal of licences and other additional expenses.
In fact, the lack of ability to hire new and train old employees could have an adverse effect on other aspects of business as well. These include attracting global talent, slowdown in investment on research and development, and new technology deployments. They will also impact the 5G rollout in the country adversely, along with Internet of Things (IoT) and cloud based services, to their full potential. This leaves the country with the bare minimum, while the world forges ahead.
Currently, Idea is looking at a merger with Vodafone India to create India’s second largest telecommunications company, while Norway based Telenor just sold its India arm to Airtel and the deals are at regulatory stages for approval. As consolidation happens, jobs are bound to get impacted.
Mobile connectivity and data services have played a pivotal role in bridging the digital divide and moving India towards a truly equitable and democratic nation. The telecom industry, therefore, deserves an urgent and immediate intervention to encourage policy and regulatory stability, and facilitate growth, innovation and investment.
The writer is director general, Cellular Operators Association of India