Aircel’s bankruptcy and the search for jobs in the telecom sector
As Aircel prepares to face rough times ahead, the company and its employees have already begun to feel the heat. In a move that added fire to the fears of many, the Economic Times reported that the CEO of the company KaizadHeerjee in an email told employees to brace for “difficult times” amid “serious funding issues” in the face of intense competition. “We have had no funding for some time and have been dependent on cash generation from our current business operations,” he said.
Symptomatic of what has been occurring in the telecom sector for quite a significant portion of last year, Aircel is now going through what many of its earlier competitors like Tata Teleservices and RComm have already faced—increasingly shortening profit margins and a growing state of debt within the company. This in addition to costs the company incurs to maintain 3G and 4G services, which slowly have become an industry standard. Aircel seems to presently be heading down a way which many within the sector have already gone through; a path that either leads to the company shutting down or be acquired by a larger player.
A sector distraught with layoffs and consolidation, many hope that the telecom sector might just be in its last stages of adjusting to the changes in the last couple of years, primarily due to the entry of Reliance Jio. Jio’s entry shook many of the traditional companies, many of whom were heavily debt-ridden businesses. Facing a steeper competition and a need to provide cheaper access to data services to their customers, telecom companies sought mergers and acquisitions as a way to survive and grow. Consequently, last year witnessed two major mergers in the sector—the Idea-Vodafone and Airtel-Tata Teleservices in addition to many smaller companies like Telenor being acquired. Unfortunately for Aircel, its chances of negotiating a merger deal were squashed when the deal with RComm didn’t materialize.
The talent implications
This tumultuous phase in the telecom sector has spelt some hard times for the employees at work within the sector. Faced with uncertainty, the once stable telecom sector is bound to witness a decline in headcounts for the next six-nine months. This would reportedly take the total number of job losses in the sector to about 80,000-90,000.
According to a report, since last year the sector has already lost around 40,000 people, and the trend is likely to continue for the next six to nine months and may see the numbers reach significantly large numbers. "The attrition rate is likely to remain high at least for the next two-three quarters, and the sector is likely to reduce around 80,000-90,000 people," the Bengaluru-based company's chief executive Aditya Narayan Mishra said
After Aircel's management told its employees to brace for 'more difficult times ahead,' the fate of over 5,000 odd-employees is unclear. Many employees aren’t waiting to find out what’s in store and are reportedly looking for new jobs. But given the overall scenario of the telecom sector, many such employees are staring at a job market already clogged with former employees of other telecom companies that haven’t been able to weather the storm. On the other hand, the telecom companies are currently grappling with losses, and in order to cover the costs, they are either shutting down their business or going ahead with a merger. Even with mergers, companies like Vodafone India have witnessed a significant attrition level, further accentuating the problem.
One of the core reasons why the entry of Reliance Jio rattled many of the traditional telecom companies was because of the heavy debts that many were in at the time. Jio entered the market with a substantially large financial backing and soon was able to influence industry standards when it came to pricing, access to cheap and better data services, and customer acquisition. To match the growth rate of Reliance Jio, better and cheaper services had to provided as an option to customers. Since this requires having access to significant financial resources over a long period, many within the industry with their increased debts and lax business practices have barely survived. To get an idea how bad the debt structure within the sector, here is a report by Bloomberg Quint highlighting the debt issues within the sector.
In a situation similar to their rival Rcomm that declared last year it would soon stop all operations due to the lack of funds, Aircel is now finding it difficult to raise any more money that can help it stay afloat. This has affected its services as in many states people are hurrying to port out of the company’s network services. And as is the case with many such debt-ridden companies experiencing a fall in financial performance, the employees have had to face the brunt.
Reports state how headhunters and recruitment companies have already received several CVs from Aircel employees and are expecting it to shoot up post the management's warning letter. Many of these involve employees who have worked majorly in the sector, and thus most of their skill sets are specialized for the telecom sector. With an already saturated talent market and faced with increasing consolidations, job openings have significantly gone down with many companies currently on a hiring freeze. Thus many within the telecom sector are currently stuck in a state of uncertainty.
Although many have speculated that post-consolidation, the industry is likely to turn healthier and stable than it was a year ago, the market would eventually mature with only three to four major players in the business. Problems like the debt are not going away soon. The industry is saddled with a debt of around Rs4.5 trillion, and also owes close to Rs 3 trillion in spectrum payment charges. With newer technology, the skill sets required are going to change, and many employees would need to be re-skilled. Such factors increase the pressure on the already uncertain and strained labor market. With the high number of projected layoffs, many debates whether the situation mandates some form of government intervention.