The Indian telecom sector is facing about 40,000 job cuts in total over a period of six months. This analysis comes after the Supreme Court’s verdict that mandates telcos to pay upto Rs. 92,641 crore to the Department of Telecom because of the AGR (adjusted gross revenues) dispute.
As a result of this verdict and in order to find a way to pay up the amount, telcos would have to reduce the size of their workforce by about 20 percent. The telecom sector which not only includes telcos and internet service providers, but also towers’ companies, employs about two lakh workers.
The AGR dispute could impact the financial situation of telecom giants such as Airtel and Vodafone Idea. For example, Airtel would have to contribute about 23.4 percent of the total amount while Vodafone would have to shell out 30.55 percent. In light of these recent developments, Airtel has postponed its Q2 results until Nov. 14, 2019.
From 2016 onwards, with the entrance of Reliance Jio in the landscape of telecommunications, the size of the sector has reduced by more than 30 percent with the closure of big names such as Reliance Communications, Aircel, Telenor, and others.
A high debt burden along with the ongoing tariff battles in addition to the apex court’s recent ruling can have a troubling impact on the existing companies. Airtel suffered a net loss of Rs. 2,392.2 crores in the quarter that ended in June 2019. Vodafone Idea also announced a loss of Rs. 4,873.9 crores during the same time frame.
The AGR dispute is about 16-years-old now between DoT and telcos wherein the DoT wanted to include interest income, dividends, profits on the sale of assets, insurance claims, and foreign gains, should be included as AGR.
As the telecom sector faces turbulent times from both economical and business aspects, in addition to a high level of debt has put innovation such as the transition towards 5G technology has almost come to a halt. Experts predict that it would still take about a year to see some enhancement on the jobs’ front. As of now, it remains to be seen how this sector will face the music from all sides.