Minister Manoj Sinha says there is no job crisis in the telecom sector, here's a reality check

When Telecom Minister Manoj Sinha said there was no problem of jobs in the sector, probably he was unaware of thousands of employees preparing to go home. India's telecom sector has been in stress for quite some time. Cost-cutting and consolidation are major threat to jobs.

What the minister said
Yesterday, when asked about the jobs that could be lost when companies such as Reliance Communications (RCom) shut shop, Sinha said, "There is no problem of jobs. Look at the number of stores being opened by Jio. To say that jobs are reducing is untrue and far away from the truth." He said rapid consolidation would stabilise the sector, and that the entry of Reliance Jio had in fact added to employment.

Sinha's optimism about the jobs scenario in the telecom sector may be based on longer term. Right now, a lot of employees are living in fear.

The job-loss scare is real
After 30 days, a number of Reliance Communications (RCom) employees could be looking for another job. The company is believed to be closing down major parts of its wireless business. The Tata Group is selling its mobile business to Bharti Airtel, which might lead to some job losses. In June, Reliance Communications Chairman Anil Ambani said the country's telecom sector had cut 10,000 jobs last year, and the ongoing stress would further lead to reducing 30,000-40,000 jobs more this year. In February this year, ET spoke to more than a dozen analysts, recruiters and company executives who said telecom employees were scared about jobs being on the line despite assurances. An HR head said 10,000-25,000 jobs were at risk. If those indirectly employed are also added, the number could rise to as much as 1 lakh.

What is the remedy?
The telecom industry, struggling under a burden of nearly Rs 5 lakh crore of debt amid brutal price competition, has been seeking government sops for financial relief. Apart from increase in tenure of payments for auctioned airwaves and lower interest on dues, industry also wants lower annual licence fees and spectrum usage charges. According to an expert, nearly half the sector debt is in the form of deferred spectrum liabilities to the Department of Telecommunications.

The government has formed an inter-ministerial group (IMG) to look into the issues faced by the sector. The IMG has reportedly recommended to the Telecom Commission that the period of deferred spectrum liability payment be increased to 16 years from the current 10 years. Another recommendation by the IMG is that the telcos may be allowed to pay for the spectrum with interest calculated marginal cost of funds-based lending rate rather than the prime lending rate.

Why should the government step in?
India’s telecom sector–once the poster child of the country’s economic progress–is in dire straits, battling brutal price competition and grappling with unsustainable levels of financial stress. The Reserve Bank has directed banks to keep especially close watch on telecom loans amid the erosion of profitability. While financial stress led to cost-cutting which included layoffs, now the consolidation in the sector is also likely to cause huge job losses.

The health of telecom sector is vital for the Indian economy. According to the Annual Report 2016-17 of the Department of Telecommunications, the telecom industry in India currently contributes 6.5 per cent ($140 billion) to the country's GDP, and employs over four million people (directly and indirectly). The government can either keep treating the sector as just another big source of revenue or help it survive the crisis.

Moreover, if outstanding debt of the telecom sector goes sour as bankers fear, that would add majorly to the banks’ already grown bad debts.