MICRO

ECONOMICS

ASYNCHRONOUS SESSION 1 A

ANALYSIS ON IMPACT OF COVID 19 ON INDIAN

ECONOMY (Telecom Sector)

NAME: Radhika Singhania

REG. NO.: 1920343

DATE: 22/05/2020
IMPACT OF COVID-19 ON THE TELECOM SECTOR IN INDIA:

As the whole world continues to suffer from the deadly outbreak of the pandemic, ‘work from
home’ and ‘social distancing’ have become an integral part of today’s business landscape, with
the telecom sector being the helpful hand driving this shift and keeping people sane. Video
conferencing, remote working and telecommunications technology have emerged as right hand
for business operations and streaming services such as Netflix, etc. have replaced theatres for
entertainment, putting the telecom sector in spotlight today.

The government has also acknowledged the importance of having a strong telecommunication
during this difficult time. According to the recent reports, overall traffichas jumped by 10%
and streaming platforms have witnessed a spike by 20% in viewership. Unlike other industries,
the telecom industry might emerge as the golden child of this economic slowdown. However,
the increased dependency on this sector and other restrictions due to the pandemic, have also
raised a set of challenges for the telecom sector, as highlighted below.

A. Implementation of exemptions for the telecom industry:

As the government has asked other sectors to shut down their operations during the
lockdown, telecom sector was exempted to allow uninterrupted services to continue.
The telecom industry also wanted continues access to towers for maintenance, refueling
and to mitigate some of the issues seen at the local level.
B. Rising demand and current infrastructure:
Now that the demand for services continue to grow, given India’s dependency on
wireless traffic, the pressure on the cellular infrastructure has also increased
tremendously. This has also affected the speed of various networks. Several analysis
shows that switch in network usage to residential networks from enterprise networks
may present another set of challenges on managing the network load. This may result
in broadband penetration for residential use. The government has also requested the
networks to not terminate any interconnection points.
C. Impact of the lockdown restrictions:
While there has been an increasing demand for this sector, the industry is also
dependent on other industries, which have been severely affected by the pandemic.
1. Impact on manufacturing of hardware and other systems- this industry will be
impacted due to global disruption in supply chains, which in turn will result in
 increased costs and lack of availability. ICEA says that the manufacturers may incur
a loss of nearly INR 15,000 crore due to suspension of these products.
2. Addition of new subscribers- there has been a sharp dip in the purchase of new sim
cards. This will impact the revenue in the first quarter of FY 2020-21. The lockdown
will also slowdown the 5G spectrum auctions. The restrictions on manufacturing
and movement of goods will also limit the ability to roll out 5G enabled handsets.
3. Impact on tariffs- the country continues to have the lowest tariff rates in the world.
Reports indicate that the country has planned for a second round of tariffs, but the
impact of COVID 19 on spending ability may delay the pan.
4. Subscriber retention- on seeing the increasing challenges, the focus has been shifted
towards preserving the existing subscriber base. This is challenging based on the
ARPU subscribers. The industry has been providing several offers to engage the
customers.
5. Power tariffs- due to the increased burden on the existing infrastructure, many
networks have written to states asking for relief in power tariffs. Maharashtra has
accepted to reduce tariffs by 10-15% in the state.
D. Other existing issues:
The pandemic has come at a time when the sector was already battling with the issue
of payment of Adjusted Gross Revenue. Sought relief is also not granted by the
Supreme Court. If the revenues and the available cash are not sufficient to pay the
license fees, the industry will be forced to increase debt to meet their demands. The
RBI has also issued relaxations in easy repayment and access to working capital to help
the industry.

The general outlook, globally as well as India, considers that the telecom sector will be one
of the few to escape unscathed from the pandemic and the resultant lockdown. The government
and the stakeholders are also conscious of the importance of these services in the current
scenario. It can be seen that various steps are being taken to address the short-term issues as
and when they come to light. Despite the issues, the increased demand for these services may
help offset any dip in revenues. This sector is also working to track location details of calls to
closely track the movement of COVID 19 patients and to monitor migrant laborer to help them
with food and employment.
REFERENCES:

• Casey, M. (2020, April 29). Understanding COVID-19's impact on the telecom sector:
Deloitte Global. Retrieved from https://www2.deloitte.com/global/en/pages/about-
deloitte/articles/covid-19/understanding-covid-19-impact-on-the-telecom-sector.html
• Pti. (2020, April 16). Telecom sector will not be impacted by COVID-19: Report.
Retrieved from https://economictimes.indiatimes.com/industry/telecom/telecom-
news/telecom-sector-will-not-be-impacted-by-covid-19-
report/articleshow/75180142.cms?from=mdr
• Chitravanshi, R., Rajat, Chitravanshi, R., Ascend Telecom, & Ascend Telecom. (2020,
April 27). COVID-19: Impact on Telecom Sector. Retrieved from
https://cpoinnovation.com/covid-19-impact-on-telecom-sector/
• PricewaterhouseCoopers. (n.d.). COVID-19 and the telecommunications industry.
Retrieved from https://www.pwc.com/us/en/library/covid-19/coronavirus-
telecommunication-impact.html
• COVID-19 News: Tracking its impact on telecom sector. (2020, May 21). Retrieved
from https://tele.net.in/covid-19-news-tracking-its-impact-on-telecom-sector/