Expert say, layoffs loom in telecom industry even after AGR, Coronavirus crisis
As per the telecom experts, the 40-day lockdown amid fatal and deadly coronavirus has become a boon for the telecom industry as work from home concept has surged the overall traffic for Indian telecom service providers. However, this boost will not compensate for the distress that the telecom sector has been facing due to intense competition, pricing pressures that culminated into weakened profitability and elevated debt levels and the adjusted gross revenue (AGR) dues, as per experts.
“Even if they are immune to the impact of the coronavirus pandemic (COVID-19) outbreak, they have more significant challenges like the AGR issue to deal with,” said a senior executive of a telecom equipment manufacturing firm on the grounds of anonymity.
Telecom services are considered an essential service by the government, Airtel and Vodafone are not in the pink of health and therefore they might have trouble surviving this, the senior executive opined.
Anupama Arora, Vice President and Sector Head, Corporate Ratings of the credit rating agency ICRA highlighted that the AGR related dues (required to be paid as per the Supreme Court (SC) order which is pending as the lockdown happened) casts uncertainty regarding recovery timelines notwithstanding steep tariff hikes announced by all telecom operators in December 2019.
According to rating agency Icra, AGR issue casts a significant degree of uncertainty on the telecom sector, and will have a long-term bearing on structure and recovery of the industry but, there will be no major impact of the ongoing nationwide lockdown on telecom services.
This is because the pressure on revenues on account of limited customer addition, along with lack of physical recharges is moderated by the surge in mobile usage due to work from home regime and content viewing, supported by shift to digital recharges.
“Increased usage of telecom services as people work remotely/ from home has exerted pressure on network capacity of telecom operators, thus, the ability of their networks to support growing usage for a prolonged period remains to be seen if the lockdown persists,” said Arora.
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