Telecom Players pause Hiring, Is Telco Growth In India Fading?


If there is any sector in India that has acquired significant positive press, it has got be the telecom sector. Record Subscriber Growth, Cut Throat Pricing, MNP, 3G launch are some of the examples which put the Telecom sector at the center of Indian growth story in the past 3-4 years despite the 2G scams.

However, the last few months have witnessed minor trends which could signal that the telecom story in India might be getting deceleration. The first signs have come in the form of constant drop in the mobile subscriber growth for the past 5 odd months. Given that in the end there are still additions but contrast this with record breaking growth numbers in the last 2 years and one questions if something has changed.

Job market is another good indicator of the health of a sector even though it could be a short-term indicator depending on the internal and external factors.

The job market trends in the telecom markets in India are unfortunately are not painting a bright picture either. Majority of telecom carriers are putting brakes on hiring and even resorting to "rationalization" and "optimization" (euphemisms for layoff).

Indian Telecom Sector Job Cuts

  • Vodafone, Idea, Aircel and Reliance have put complete brakes on fresh hiring
  • Tatas have merged their CDMA and GSM divisions and rationalized some 750 positions
  • Bharti Airtel has gone in for a comprehensive restructuring, compromising around 2,000 job positions (This could be primarily as a result of the restructuring post Zain acquisition)
  • Others like Videocon, Loop Telecom are also expected to cut jobs and some might even exit the space altogether

As I said earlier, it might not be justified to peg slump in hiring to the long term sector health but the fact is that the market dynamics in the Indian telecom sector do not show many positive signs.

The pricing wars have made the profit margins extremely thin especially after major players have invested a lot of capital in getting 3G licenses and building out the required infrastructure.

Add to that, the low pricing addiction that they have inflicted on consumers which is possibly making it difficult for these operators to monetize 3G offerings (The fact that none of the operator has managed to provide a seamless 3G experience is not helping either).

The general consensus is that consolidation is going to be the operative key word in the Indian telecom market going forward. Some even suggest that the market might be saturated already. The ever optimist that I am, I still think we are far from that. But yes, the market has too many mediocre players offering the same thing and in a market so competitive, not having a differentiated value proposition does not make things any easier.

I personally feel that data and not voice will determine the competitive positioning of telecom operators in India in the near future.

VAS (Value Added Services) is another area where I think telecom operators can look for developing exclusivity and differentiating themselves from the herd.

What are your thoughts on the state of telecom operators in India? Are we headed for an irreversible slowdown or is it a short term blip in the otherwise bright future of telecom operators

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