Downswing Continues in Indian Telecom Sector, About 90,000 Job Cuts Expected This Year

Amidst the continuing depression in the Indian private telecom industry, the uncertainty in the once sunshine sector will lead to more job losses. Estimates suggest that in first two-three quarters of the current financial year, the total number of job cuts could reach 90,000. It is considered that the ongoing mergers and acquisitions in the telecom industry have contributed to the current depression and it may aggravate the situation.

A report prepared by CIER HR says that the trend of the job cuts would continue in 2018 too. Last year, the telecom sector had lost around 40,000 jobs.

“The sector has been witnessing rough weather in terms of profitability. High cost of loan servicing and aggressive competition for the market share has reduced the profitability per subscriber,” the report says.

The uncertainty in the telecom sector has been looming since the introduction of aggressively competitive Reliance Jio by Mukesh Ambani in September 2016. As Reliance Jio has been offering telecom services for drastically reduced tariffs, other private players in the market have been forced to reduce their tariffs to sustain in the market. 

P Abhimanyu, national general secretary of BSNL Employees Union, had noted earlier that Mukesh Ambani has a strong financial muscle, and has started to give all the services for free to the customers, to wind up the business of all other private service providers. However, private players, to maintain their super dominant power in the market, were forced to rework their strategies after the introduction of Reliance Jio.

To overcome these losses, the telecom companies have already started to cut down their workforce, Abhimanyu added.

For the last two years, the industry has witnessed a steep decline in the number of operators in every telecom circle in the country from an average of 10 operators in a circle to an average of six operators resulting in thousands of job losses.

 “More layoffs may follow once the continuing process of merger and acquisition of various players gets completed,” said K Sebastian of SNEA, an employees association of BSNL and MTNL officers that closely follows the issues in the private telecom industry.

Many telecom services like Reliance Infocom – owned by Anil Ambani, Aircel and Telenor are either closing down their services or are operating at the risk of a huge loss. According to Sebastian, once the merger of India’s second largest operator – Vodafone, and the third largest operator – Idea Cellular Ltd, gets completed, a large section of the employees will lose their jobs.

On the other hand, Bharti Airtel had initiated the process for the merger of the company with Tata Teleservices Limited and Tata Services Maharashtra Limited. One latest report also suggests that Bharti Airtel is in the process of acquiring Telenor India.

Ever since 2008-09, private telecom industry has witnessed a decline in total annual revenue. A CLSA report released on April 7, 2017, explained that the annual revenue of Indian telecom companies declined to Rs 1.88 trillion in 2016-17 from Rs1.93 trillion in 2015-16 and will decline further to Rs 1.84 trillion in 2017-18.