In yet another sign of the increasing stress on the telecom industry, reeling under the pressure of immense competition from the giant Reliance Jio, the Tata group firm Tata Teleservices has laid off 500-600 people.
The employees, which the company executives said have been let go to tide over difficult times in the hyper-competitive telecom market, were from sales and other related functions, and from across locations in the country, PTI reported citing two unidentified people. “What most of the operators including Tata Telservices are doing is workforce rationalisation, to stay competitive in line with the needs of the market,” the report said citing the people.
Tata Teleservices is offering one month of salary for every year of service to the terminated employees in severance, the report said.
These lay-offs come at a time when the telecom industry is witnessing an intense tariff war triggered by the entry of Reliance Jio, whose disruptive positioning in the market has left most of the telecom companies bleeding. The telecom operators are facing tremendous pressure on revenue and profitability, even as the industry’s debt has soared to nearly Rs 4.6 lakh crore.
Reserve Bank of India, in a recent notification had asked banks to make provisions at rates higher than the regulatory minimum rate, based on an evaluation of risks and stresses in various sectors of the economy. Further, it also asked banks to ensure a quarterly review of the sectors to which they have exposure with an intent “to evaluate the present and emerging risks and stress therein”.
Indian telecom sector has been operating under tremendous pressure after the entry of Reliance Jio into the space, which, with its free-to-dirt-cheap tariff offers has forced the incumbent players to drastically cut their tariffs in order to retain their customer base.
Further, the bloodbath in the telecom industry has forced unprecedented consolidation with the giants Vodafone India and Idea Cellular agreeing to merge to gain scale to compete. On the other hand, Bharti Airtel – India’s largest telecom services operator for now – has acquired smaller rival Telenor India to further augment its customer base and network.
Earlier this year, a TV news report said that Tata Teleservices is in talks with Reliance Communications to merge its operations with the Anil Ambani group-controlled entity. Reliance Communications, on its part, is all set to finalise deals to merge Aircel Ltd into its own wireless telephony business. It is also in the process of finalising a merger of Systema Shyam Teleservices, the owner of MTS services, with itself.