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AGR ruling to herald more job cuts, hiring freeze in telecom

The telecom industry is set for a fresh round of job cuts, combined with a freeze on hiring and increments, after Supreme Court broadened the definition on adjusted gross revenue (AGR), which will add significantly to the cost of carriers such as Vodafone Idea and Bharti Airtel.


The two companies — worst hit by the ruling — have less than three months to pay what could add up to more than Rs 80,000 crore in licence fees and spectrum usage charges (SUC).


They will be forced to slash costs, especially on staffing and capital expenditure, said recruiters and industry executives. The likely curb in network investments is further expected to have a cascading effect on the broader ecosystem, including equipment makers and tower vendors.  


Sunil Mittal, chairman of Bharti Airtel, reportedly met telecom minister Ravi Shankar Prasad and secretary Anshu Prakash on Monday to press for some relief.


Government sources have told ET that after the court ruling, demands for dues will be sent out.


Authorities are trying to see if the financial blow can be softened in any way but it’s a tightrope walk as they want to avoid any future vigilance scrutiny.


“The telecom sector, which is now basic infrastructure, is in for a very rude shock as investments in capex will drop dramatically and head count restructuring will become the order,” said Navnit Singh, chairman and managing director of India for executive search and advisory company Korn Ferry International.


Aditya Narayan Mishra, director of CIEL HR Services, said bonuses and salary increases for FY21 seem unlikely, and as another hiring freeze is expected. 


The top court's decision, which could leave the industry with a bill of Rs 1.3 lakh crore, has come at a time when the industry appeared to be set for a turnaround after almost two years. The operator and tower businesses, labouring under a total debt of Rs 7 lakh crore, employ roughly 180,000, down from 300,000 in 2017.


Hiring mandates had started rolling out in data analytics, artificial intelligence (AI), internet of things (IoT) and in 5G technology, but there is concern this may come to a standstill.


“The operators will now have to look at ways to ensure future viability of their company which includes investments in network rollout, technology upgrades, expansion plans and manpower costs,” said Rajan Mathews, director general of lobby group Cellular Operators Association of India (COAI).


“All details regarding compensation such as increases, retention, stock options and headcount right sizing, etc., will all be up for review.” Vodafone Idea and Bharti Airtel, both currently making losses, may need to cough up dues of Rs 39,000 crore and over Rs 41,000 crore, respectively.


Vodafone Idea’s headcount of direct employees is about 10,000, down from the premerger tally of over 17,000. 


Reliance Jio Infocomm, the only profitable carrier, and Airtel’s India unit have over 15,000 and 16,000 employees, respectively.


Employee costs make up some 5% of revenue for the industry. Hiring agencies expect the market to be awash with even more telecom employees soon.


“Forty percent manpower of one of the telcos have been on the prowl for the past six months, which is clearly visible online, which we are able to track.


Now that percentage will increase sharply,” said Kamal Karanth, cofounder of Xpheno, a specialist staffing company That will depress increments as only Jio, least impacted by the court orders, is likely to hire meaningfully, he said. Vodafone Idea raised pay by an average 9% in FY20, with bonuses of 97%, after a gap of almost two years.


Bharti Airtel’s 16,000 employees got an average annual raise of 7.5% in June.  

Souce: ET