With the Anil Ambani led Reliance Communications announcing last month that 30th November would be the last month of its 2G wireless operations and voice call services, the fate of almost 3,000 employees has been left in the lurch. The lenders are already in the process of selling RComm’s assets, and, according to a report from Economics Times, Reliance Jio and Airtel are interested in buying selected spectrum and some equipment from the beleaguered company. Picking off the company in debt, piece by piece.
The total debt last reported stood around Rs. 44,300 crores. The fall of Reliance Communication comes in a line of shifts within the telecom sector that is adjusting itself to the changing market structure, accelerated by the arrival of Reliance Jio on the scene.
Since the time Mukesh Ambani’s Reliance Jio entered, the telecom market has faced stiff price wars which have resulted primarily due to the company relatively cheaper data and voice call rates. This has forced many of the debt-ridden companies in the sector like R Comm to take strong evasive steps, much to its futility.
The sector at large
The onset of price wars within the telecom sector has, over a period of time, shifted the balance; tipping it favourably to the side of players with significant resources to back their lower tariff structures. Players like Reliance Communications and Tata Teleservices who were under significant debts at the turn of the year have, as a result, found it difficult to sustain their operations. The growing pressures to manage costs under low tariffs has led many to either bow out or merge and consolidate to continue operations. Either of which is bad news for its employees.
While India’s data services market is estimated to become around Rs 95,000 crores by 2020 propelled by the increasing use mobile handsets and onset of cheaper faster technology, Reliance Jio’s entry has pushed the telecom market in turmoil. As competitors have had to respond to the changes in the markets, their steps have led to massive job losses and consolidations. Many small players have been forced to wrap up their operations or be absorbed into larger companies. A sector which earlier had around 7-8 players, has been now brought down to three major ones.
According to data from the Centre for Monitoring Indian Economy (CMIE), around 1.5 million jobs were lost from January-April 2017, with the telecom sector being among the hardest hit ones.
Consolidations and the possible destruction of value
According to an Economic Times report , the telecom sector lost a fourth of its workforce, or around 75,000 employees, in the last one year. This has been the result of either exiting the market or consolidations between the operators.
This is not the first time the telecom sector is witnessing consolidations. Between 2001 and 2004, there were several deals that saw the exit of regional players like Koshika Telecom and Escotel and the emergence of pan-India operators. But this time around, the consolidations have been more painful for those exiting.
The shutting down of operations by RComm, for example, has come as a major blow to the company’s employees. There have been reports which state that most of them have received calls from the HR department asking them to resign within 24 hours. The employees have also alleged that the company has also asked them to mention that they are resigning due to ‘personal reasons.’ A petition #saveRcomemployee has been started, addressed to the Prime Minister, Union Telecom Minister, Union Labour Minister, and other important decision-makers, appealing that RComm be revived, or fired employees be absorbed in other Anil Dhirubhai Ambani Group verticals, so that the jobs of thousands of people in the telecom sector do not get affected.
Even Aircel, following the collapse of its merger plan with Reliance Comm, finds itself on thin ice. Being the sixth largest mobile company in the country with over 89 million subscribers as of end August 2017 would soon mean little as it is also reeling under massive losses and faces long-term bank debts. The rating agency CARE recently went ahead and downgraded their loans to default status after the telecom company delayed in servicing its long-term bank loans amounting to a total of INR 174.79 billion (USD 2.7 billion). Amid legal and financial troubles the company may be left with no option but to wind up operations. This might just mean another round of massive job cuts.
For the other major players in the market that have gone down the road of consolidation, job cuts haven’t necessarily seized. The ongoing price wars have led to cost-cutting manoeuvre and employees have been the first casualty. Both in the Vodafone and Idea merger and the Bharti Airtel and Tata Teleservices who are also in the process of merging their businesses, the eventual overlapping of job portfolios is also said to be a cause of job cuts.
Writing on the wall?
Such shifts within the Telecom sector have had a serious impact on its employees. While the ones being let go have their respective challenges to face, the ones still employed still face the fear getting the axe. The impact of technology being all-pervasive, is bound to impact the telecom industry too in a strong fashion. Reports have added how both frontline sales and distribution along with jobs around data entry and tele-calling might soon become obsolete as the sector would look towards moving to more cost-effective ‘software-defined networks and infrastructure’.
Hence it comes as a little surprise when reports arise of increased stress-related disorders among the employees of the sector. Most would require to upgrade their skillsets but should eventually find employment in other sectors like e-commerce and fin tech companies. The relative stickiness of labour markets would mean that recovery would be slower.
Whether these employees will be able to find suitable employment in other sectors, many of which are also undergoing significant changes themselves is yet to be seen.