KARNATAK LAW SOCIETY’S

GOGTE INSTITUTE OF TECHNOLOGY

UDYAMBAG, BELAGAVI-590008
(An Autonomous Institution under Visvesvaraya Technological University, Belagavi)
(APPROVED BY AICTE, NEW DELHI)
Department of MASTER OF BUSINESS ADMINISTRATION

Project Report on

ECONOMIC IMPACT OF COVID 19 ON

TELECOMMUNICATION INDUSTRY

Submitted by

VINAY KAMAT 2GZ19MBA49

SANKET .S. SUNTHANKAR 2GZ19MBA31
VISHAL .S. KAGATI 2GZ19MBA52
VISHWANATH KENGNAL 2GZ19MBA54
DHANRAJ SUTAR 2GI19MBA24

Subject : Written Communication Division : B Subject Code : 18MBA203

Submitted to:

Prof. nupur a. veshne

Assistant Professor
Department of Master of Business Administration
2019 – 2020

Department of MBA, KLS GIT, Belagavi. Page 1

 INTRODUCTION

The pandemic impacts almost every sector differently, with an opportunity

for some, albeit very few

Demand side:

India expects to witness a sharp though temporary decline in domestic

consumption. The service sector would likely suffer for a while, especially owing
to the behavioural and policy changes, as more people would prefer staying away
from cinemas, restaurants, hotels and malls. Travel restrictions would impact air
and rail traffic.

Investment side:

If the spread of the contagion is not contained, the investment activity in India
will also take a hit, as the outbreak would impact views on future business
activity. Rising global uncertainty and priorities to leverage existing capacities
would keep the investment outlook subdued. To mitigate the adverse impact on
exports, it is crucial for the Indian players to continue investing and building
capabilities, especially in the infrastructure and manufacturing space.

Employment side:
Employment, especially in urban areas is going to be significantly impacted,
especially temporary workers. Increased job uncertainty and reduced wages
would lead to lower income Growth. With investment plans slowing and funds
being redirected towards the managing crisis, job creation would take a back seat.

Supply side:
It would also take India a few months before the supply side pressures are eased,
as China and other markets recover from the aftermath of the pandemic. Supply-
side disruptions to production and trade have impacted global value chains and
India has not been immune to them either. It would be a few quarters before
production value chains come back to normal levels.

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While, at one hand India has a relative short window to avoid community spread
of the contagion from increasing exponentially. At the same time, the timeframe
to implement a coordinated response to manage the economic impact of the
Covid-19 pandemic is short and now. It is essential for the Government to
introduce a series of holistic measures in one-go. We don‘t believe, a piecemeal,
select sector approach will be able to address the economic contagion impact of
this global disaster. In fact, a piece-meal approach will be detrimental in
encouraging businesses to adopt various precautionary measures which would
slow business activity in these stressed times. To deal with a pandemic such as
Covid-19, the Government and private sector would have to look beyond the cost
and resource-intensiveness of required support. The impact of such a crisis could
be much worse if the spread of the virus is not slowed,

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EFFECT OF FALLOUT ON TELECOMMUNICATIONS SECTOR

As the global economy continues to reel from the shock and the lasting impact of
the novel corona virus (COVID-19) outbreak, “work from home” and “social
distancing” have become the buzzwords in today’s business landscape, with the
telecom sector being the invisible hand driving this shift. Remote working, video
conferencing, and telecommunications technology have quickly emerged as key
enablers for business operations during this lockdown, and streaming services
such as Netflix have become the go to source for entertainment, putting the
telecom sector in the spotlight today.

The importance of having a strong telecommunications network during this

lockdown has also been acknowledged by the government in the guidelines dated
March 24, 2020, issued by the Ministry of Home Affairs (MHA), which provides
that “telecommunications, internet services, broadcasting and cable services, IT
and IT-enabled services (ITeS) only (for essential services)” are the essential
services and are exempt from the lockdown. This exemption was also provided
in the MHA notification dated April 15, 2020 (which extended the lockdown until
May 3, 2020) and in the MHA notification dated May 1, 2020 (which further
extended the lockdown for a further period of two weeks).

According to news reports, overall traffic has jumped by 10% and streaming
platforms have witnessed a 20% spike in viewership. Hence, several analysts now
believe that unlike the manufacturing and other sectors that have come to a near
standstill, the telecom industry might emerge as the golden child of this economic
slowdown. However, the increased dependency on telecom networks, and the
other restrictions on account of COVID-19, has raised a different set of challenges
for the telecom sector.

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MAJOR CHALLENGES FOR TELECOMMUNICATION INDUSTRY

A. Implementation of exemptions for the telecom industry

Although the MHA had clarified that telecommunications, IT and ITeS were
exempted from the lockdown, there were instances of local authorities asking
personnel of telecom service providers at NOCs (network operation centres) and
call centres to shut down operations. In response, the Department of
Telecommunications (DoT) had written to chief secretaries of states on March
21, urging them to allow movement of field staff of telecom companies.
It is therefore essential that appropriate instructions are received at the field level
so that the services can continue without interruption. The DoT had also written
to chief secretaries of all states on March 24, requesting them to designate a nodal
officer who can be contacted by service providers and telecom licensees in the
event of any difficulty.
This is critical given that on-ground staff need continued access to towers for
maintenance, to identify potential risks, and refuelling (for towers using diesel
genets). This move may help mitigate some of the issues seen at the local level,
in ensuring that there are no obstructions in the working of the telecom sector.

B. Rising demand and current infrastructure

While demand for services continues to spike, given India’s dependence on
wireless traffic, there is increased pressure on cellular infrastructure.
According to reports, the mean mobile and broadband download speeds in India
had fallen in March due to strain on the networks. Hence, the Cellular Operators
Association of India (COAI) has written to the Government to request streaming
service providers such as Netflix, Amazon Prime Video and Zee5 to switch to a
lower definition streaming, to reduce advertisements and pop-ups, etc., in a bid
to ease the strain on existing networks. Several service providers have already
started working on this issue.
Industry analysts have stated that as far as telecommunication networks are
concerned, fears of network choking are unfounded since there is sufficient
additional capacity. However, the switch in network usage to residential networks

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as opposed to enterprise networks (which is technologically better configured for
the high load traffic) may present another set of challenges on managing network
load. This trend may result in deeper broadband penetration for residential use.
In order to meet demand, going forward, the COAI has written, vide letter dated
March 20, 2020, to the Government to ease norms and expedite approvals for
providing services, setting up towers and to instruct state-owned firms (MTNL
and BSNL) to not terminate any interconnection points.

C. Impact of the lockdown restrictions

Admittedly, while there is increasing demand for telecom services, the telecom
sector is dependent on several other industries, which have been adversely
affected by the lockdown.
1. Impact on Manufacturing of hardware and other systems
According to reports, handset and network equipment manufacturers will be
impacted due to global disruption in supply chains, which will lead to increased
costs and lack of availability. Under the MHA order dated May 1, 2020,
manufacturing of IT hardware has been permitted even in red zones, however no
such activities can be undertaken in areas designated as containment zones.
According to industry body Indian Cellular and Electronics Association (ICEA),
manufacturers may incur losses to the tune of nearly INR 15,000 crore due to
suspension of production. Market analysts have recommended easing taxes and
levies and relaxing costs on financial aid to ease the burden on the manufacturing
sector, which will have a domino effect on the telecom industry.

2. Addition of new subscribers

Given the movement restrictions during this lockdown, there has been a sharp dip
in the number of customers purchasing new sim cards (including for migration to
4G networks).
COAI has indicated that during a regular month, the average net addition is 3
million subscribers, but due to COVID-19, the number in March may be below 1
million. We are likely to see impact on revenues only in the first quarter of FY
2020-21. COAI has stated that it takes around 30-45 days for new subscriptions

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to impact revenue and therefore the impact of a dip in new subscriptions will be
seen only around April end or early May.
Additionally, the lockdown is also likely to delay 5G spectrum auctions and its
consequent rollout as network operators are currently focused on meeting
increased demand without a dip in service quality. Due to restrictions on
manufacturing and movement of goods, this will also limit the ability to roll out
5G enabled handsets.

3. Impact on tariffs
Even after the last round of tariff hikes late last year, India continues to have the
lowest tariff rates in the world.
The lower tariffs, as a result of increased competition due to new entrants in the
market, led to a situation where the revenues of the incumbent Telcos were
considered almost unsustainable for their balance sheets.
Reports indicate that a second round of tariff hikes had been planned in the April-
June quarter of 2020, however, given
(i) the impact of COVID-19 on spending ability (especially of low income
subscribers),
(ii) the benefits required to be extended by Telcos (as stated above)
(iii) the dip in subscriptions, the planned tariff hikes may be delayed to the
second half of 2020.
TRAI had floated a consultation paper on the need to set floor price (so as to
ensure reasonable return on capital) and the COAI had written to TRAI,
requesting that an open house be conducted digitally to fix floor pricing. This
would, while being within the authority of TRAI, be a departure from the existing
regulatory forbearance maintained by TRAI in relation to tariff fixation. The
proposed discussions on setting up the floor tariff have been deferred until the
current situation eases.

4. Subscriber Retention
Market share is one of the most important performance metric held closest to the
chest by Telcos. Given the challenges of increasing market share in such times,

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focus would automatically move towards preserving the existing subscriber base.
This is most challenging with respect to low ARPU (Average Revenue per User)
subscribers. During this lockdown period, there are reports that Telcos have
granted dispensations to their subscribers – like extended validity, additional talk
time benefits, etc., as attractions to continue service. TRAI, raising concerns
around price discrimination, has, on April 7, 2020, written to Telcos, alleging that
they were selectively increasing validity of prepaid users during the lockdown.
However, the Telcos have written back to the regulator, contending that they have
provided benefits worth at least INR 600 crores to subscribers who are at the
bottom of the pyramid to ensure connectivity during this time. These initiatives
would be towards reducing drop-outs for low ARPU subscribers, who otherwise
would not necessarily have be in a position to make timely recharges, either due
to monetary reasons or access to online recharging facilities. This initiative also
helps towards ensuring connectivity of larger masses and for widespread
information dissemination, which is critical at this point. This is consistent with
the representation by the Telcos to TRAI, where they have stated that if these
benefits were offered to an extended pool, this would amount to “an unjustified
subsidy” to the customers who can afford these services and cause a steep loss to
the industry. Subsequently, TRAI has undertaken a detailed review and has
decided not to issue any further directives at present.

5. Power tariffs
Given the increased burden on the existing telecom infrastructure, the Tower and
Infrastructure Providers Association (TAIPA), which includes Bharti Infratel,
and Indus Towers as its members, has written to various states, seeking relief in
power tariffs. The Maharashtra State Electricity Regulatory Commission
(MSERC) has proposed to reduce tariffs in the state by up to 10-15 percent.
TAIPA has stated that similar relief from other state authorities would support
telecom infrastructure providers in the present situation.

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D. Adjusted Gross Revenue (AGR) and other existing issues in the telecom
sector

The COVID-19 outbreak and the resultant lockdown have come at a time when
the telecommunications sector was already grappling with the issue of payment
of Adjusted Gross Revenue (AGR). The Supreme Court had recently rejected the
self-assessments of AGR dues undertaken by a few Telcos and had refused to
take up the Centre’s submission to allow telecom companies an extended period
of 20 years to pay the AGR dues, stating that the matter will be listed in two
weeks.
Now, due to COVID-19, there is uncertainty around the listing of the matter in
the Supreme Court. However, reports state that as of now, no notices have been
sent to the Telcos for AGR dues and the focus of DoT is to ensure smooth
operations during the pandemic.
In the event the sought relief is not granted by the Supreme Court, and the Telcos
would be required to pay the AGR in full or without any deferment, the financial
impact on Telcos could be severe. If the revenues and available cash are not
sufficient to pay the license fees (based on the revised interpretation of AGR),
Telecos may be forced to consider increasing debt to meet demand. But, given
the precarious financial conditions, lenders willing to extend financial assistance
will be scarce and cost of borrowing will be higher (as compared to the pre-
COVID situation), given the impact on the sector, creating a vicious cycle.
To help the industry and the economy, the RBI has issued certain relaxations to
ease repayment and access to working capital, such as a moratorium of three
months on payments of all instalments falling due between March 1, 2020 and
May 31, 2020.
A recent report by ICRA also indicates that the debt levels in the industry, which
moderated to around Rs 4.4 lakh crore as of March 31, 2020, may rise further on
account of the AGR dues to almost Rs 4.6 lakh crore.
Other ongoing issues include exemption of GST on license fee and payment for
spectrum acquired in auctions, and exemption from service tax on amount of
license fee payable pursuant to the order of the Supreme Court. While these were
ongoing discussions (with the government), the lockdown and the pandemic will
lead to a delay in outcome.

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E. Outlook and way forward
The general outlook, globally as well as in India, considers the telecom sector to
be one of the few that may escape unscathed from the pandemic and the resultant
lockdown. The government and all stakeholders are also cognizant of the
importance of these services, given the current scenario. We are seeing steps
being taken to address short-term issues as and when they come to light. Despite
the issues, the increased demand for services may help offset any dip in revenues,
especially the high-end subscribers and other people who have been working
from home and those who need strong and reliable network to continue
functioning.
An additional area where Telcos may be able to help is in assisting the
government with outreach and analytics to spread awareness about COVID-19,
and to provide anonymized data to the government for analytics, which could be
used for developing plans for combating the pandemic. The DoT and mobile
phone operators are working to track location details of calls to closely track
movement of COVID-19 patients as well as to monitor migrant laborers to help
them with food and employment. Several Telcos have already started taking steps
in this direction. Further dialogue between regulators and service providers would
go a long way towards, firstly, resolving some of the issues highlighted above,
especially considering the importance of the telecom sector today, and secondly,
toward developing effective strategies against the pandemic.

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 STRATEGIES TO REVIVE TELECOMMUNICATION SECTOR
We are witnessing new normal after lockdown in the country. Remote working,
Home entertainment, video streaming, Remote Education, use of collaborative
platform and accelerated use of digital payments have quickly become the life
blood of modern society.

Many analysts believe once we’re through the worse of this virus, Telecom will
be one of the few still standing and, in many aspects become part of normal life.

While this new normal have opened up new horizon of opportunities for
communication service providers, they will also be challenged to meet up the
requirements of consistent demand for High Speed Broad Band connection, High
quality service experience, Quick resolution time, Customer segmentation based
on their usage habits and preferences, Retention of customers,

5G and Fiber to Home

These global opportunities will present itself in different forms in different parts
of the world. Roll out of 5G which was expected to take off in 2020 onwards in
developed countries will only get delayed as CSPs will be extremely careful in
massive capex investment until global economy is coming out of recession.
Emerging countries like India and other South East Asian countries will delay
their investment in 5G and would rather leverage the investment made in 4G

Fixed Broad Band was gaining momentum for providing high speed internet
connectivity along with triple play and Quad play services and current scenarios
have presented accelerated opportunities to meet up the sudden need of high-
speed connectivity.

There will be need of supporting multiple services like High speed Internet (HSI),
OTT services like You tube, Netflix, Amazon prime, collaborative platforms like
WebEx, Microsoft Team, Zoom etc for remote working and also remote
education simultaneously.

In countries where 5G roll out is stunted due to Capex constraints arising out of
onslaught of Covid -19, High speed internet connectivity through fiber will open
up new opportunities for ISPs. They will be able to leverage the current Home
pass assets for connecting end users.

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Technology as major Business Enabler:

Investment in technology platforms will be critically vital to track the new needs,
spot the opportunities ahead of others and fulfil those demands quickly.

Traditional practice of increasing number of foot soldiers for Network Operation

and Maintenance, collecting data from many desperate applications for customer
insights, despatch of truck roll for home broad band and ordinary call centre have
to be substituted by new technology platform like Real time analytics for network
performance and Customer Analytics powered by Artificial intelligence and
Machine Learning.

It would be imperative to capture customer experience insights in advance and

cross relate experience index with other network performance parameters to
identify the problems pro-actively and initiate actions. Traditional Network
Operation Centres (NOC) has been built to capture network alarms and faults at
only Network element level.

Capability of capturing and fusing multiple inputs can be effectively delivered by

Network analytics Solution powered by sophisticated algorithms and Artificial
Intelligence.

CONCLUSION
As the world continues to cope with the effects of Covid-19, the
telecommunication companies and tech sector has undoubtedly come to the
forefront as the golden child of the global economy. But telecom companies with
clear vision of deploying technology driven approach to deliver best in class
service will get differentiated from those with traditional approach.

Deployment of Analytics solution, Artificial Intelligence and Machine learning

for getting insights of customer behaviour, determining their emerging needs and
fulfilling those in most efficient manner will be incredibly important now and
also in future.

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