In the times of social distancing, tremendous effort is being made to stay socially connected but physically distant. The telecommunication industry is the invisible force behind the same.
The COVID-19 pandemic has created an unprecedented set of circumstances where people are adapting to newer forms of working and social practices.
The sharp rise in the use of digital tools, including video-conferencing, cloud computing, and electronic payments puts the telecommunications sector in the spotlight in facilitating this new ‘normal’.
COVID-19 Pandemic Has Come At a Troubled Time For Telecom Sector
As COVID-19 continues to disrupt vital aspects of the Indian economy, it is no alien to the telecommunication sector. India is currently the world’s second largest telecommunications market with a subscriber base of 1,189.28 million (with 1,168.32 million mobile telephone connections and 20.96 million landline telephone connections).
In addition, due to COVID-19, the net subscriber additions may fall by at least 2 million in March 2020 alone.
The battered sector is further likely to be adversely affected if the government-imposed lockdown continues.
The COVID-19 crisis has come at a troubled time when the issue of the Adjusted Gross Revenue (AGR) is looming over the sector. The Supreme Court ordered that no exercise of self-assessment/re-assessment can be done and dues have to be paid.
It had further directed the matter to be listed immediately post two weeks from the date of the order. However, due to COVID-19, the uncertainty surrounds the fate of the listing of the matter during the lockdown.
To its relief, there have not been any notices sent by the Department of Telecommunication (DoT) to the Telecom Service Providers (TSPs), putting the issue of AGR payments on the back-burner in light of COVID-19.
While the COVID-19 outbreak will have a ripple effect across the sectors, the telecommunication sector is working day and night to ensure the seamless functioning of the society.
Measures Taken to Ensure Seamless Network Connectivity
As COVID-19 continues its rampage, to contain the outbreak, the Ministry of Home Affairs, Government of India, on 24 March, issued a set of guidelines for the lockdown which explicitly exempted telecommunications, internet services, broadcasting, and cable services, these being essential services.
To ensure seamless network connectivity, three private TSPs – Vodafone Idea Limited, Reliance Jio Infocomm Limited, and Bharti Airtel Limited, have taken several measures.
These measures include inter alia setting up of Network Operating Centres (NOCs), and virtual war rooms for coordinating efforts with team members, and obtaining permission from DoT for hassle-free travel for critical workers who are required to maintain their NOCs to resolve network-related glitches.
Similarly, the DoT, in this unique situation, has also taken quite apt and timely measures such as extending the deadline for compliance and audit till 31 March 2020.
On Cellular Operators Association of India’s (COAI) request to further extend the deadline in view of 21 days lockdown, Telecom Regulatory Authority of India (TRAI) extended the due date to file monthly and quarterly reports by six weeks.
Moreover, TRAI by pre-empting hardship faced by users to recharge prepaid balances via offline channels has also directed all the TSPs to extend the validity period ensuring uninterrupted services during the lockdown.
RBI’s Relief Measures
The Reserve Bank of India (RBI) also issued a set of measures for relaxing repayment pressures and improving access to working capital. Therefore, banks may allow a moratorium of 3 months on payment of all instalments in respect of term loans falling due between 1 March and 31 May 2020.
Accordingly, the repayment schedule may be shifted across the board by three months.
It should be noted that this is not a compulsory moratorium but a relaxation offered by the RBI to the lending institutions.
Such measures will have to be provided by relevant lending institutions to its borrowers. Debts of around Rs 1.6-2 lakh crores are owed by telecom operators to Indian banks.
The three months moratorium, if offered, will be welcomed by the TSPs as it will be a big stimulus to maintain cash flow at times when working capital may be crucial in ensuring operational integrity.
The RBI also clarified that the moratorium provided will not result in asset classification downgrade. As a result, if the moratorium is granted by the lending institutions to TSPs, there does not arise any contractual obligation on the part of TSPs during the three month period, putting to rest the fear of Non-Performing Assets (NPA) classification.
Easing Network Congestion Due to Greater Use of Online Platforms
The government-imposed lockdown will result in a steep rise in data traffic on networks. To ease the network congestion, the COAI has asked over-the-top streaming services platforms like YouTube, Netflix, Facebook, and Amazon Prime Video, etc. to reduce bit rates for videos on their platforms in India.
As a result, YouTube has temporarily put all the videos on default mode and Netflix and Amazon Prime Video have also lowered their bit rates.
Netflix also reported that it would reduce traffic on its networks by 25 percent without affecting the quality of service for users in India.
To deal with COVID-19, the TSPs are also adopting novel strategies to track and contain the spread. Vodafone, for example, has launched a five-point plan to help the communities by improving the government’s analytics, and developing insights based on large anonymised data sets wherever technically possible, and legally permissible.
TSPs are looking for ways to minimise the disruption caused to the education sector by providing access to learning materials via the internet.
Similarly, Bharti Airtel has also taken several measures by enabling its NOCs and Call Centres to function virtually. Other TSPs are also likely to explore strategies to leverage their sectoral expertise raising the need for similar regulatory considerations.
Impact of COVID-19: Challenges Faced By TSPs
Telecommunication, being a people-intensive sector, where a large part of the workforce works at call centres, offices, and retail storefronts, etc, productivity is likely to be adversely affected with remote working conditions.
Despite measures taken by various ministries for the smooth functioning of essential services, the ground reality is deeply concerning.
Notwithstanding the government orders specifying telecommunication as an essential service, gaps in information flow and implementation remain a true challenge.
As a result, the workers of telecom companies are facing travel hindrances from police personnel affecting the timely availability of diesel for DG sets for use as backup power sources in case of non-availability of electricity.
The DoT has granted 24X7 permission to mobilize the field staff to be able to reach and access telecom towers sites and work. However, the DoT has expressed concerns that necessary instructions/information have not been passed on to relevant police personnel on duty at barricades en route.
The DoT has also painfully highlighted that there have been several instances of manhandling of telecom personnel by police, which not only present risks to relevant personnel but also maintenance and integrity of telecommunications infrastructure.
Lack of Availability of SIM Cards, Trouble Moving From 2G to 4G
In addition, TSPs are facing issues of transportation of telecom equipment, disruption in supply chain and customer support services, as well as staff shortages to cater to the increased demand.
Furthermore, with the closure of retail brick and mortar stores, a lack of availability of new SIM cards presents additional challenges for consumers seeking to move from 2G to 4G.
COVID-19 will also delay logistics surrounding 5G delivery, affecting further revenue for the industry.
Another impact would be on the issue of fixation of floor tariff which has been languishing for several months now. The TRAI issued a consultation paper on “Tariff Issues of Telecom Services” on 17 December 2019. However, with no progress in that regard, the issue is further likely to get delayed in light of COVID-19.
The loss likely to be caused by these challenges, however, may be offset by the increase in data usage in mobile and home broadband space in India.
By comparison, China’s telecommunication industry reported steady growth in the first two months of this year, wherein the industry reached 224.2 billion yuan (USD 31.55 billion) during that period, up 1.5 percent year-on-year, which was the highest in the last 12 months.
Early indicators suggest a similar trend in India where for instance, on 18 March, the peak traffic at Mumbai Internet Exchange rose to 2.45 terabits per second as compared to the last year traffic peak at 772.60 gigabits per second, nearly one-third of this year.
The Way Forward
The impact of COVID-19 on the revenue of the telecommunication sector will likely be seen only in the first quarter of the new fiscal year, starting April.
However, as a result of the extraordinary situation created by COVID-19, the Digital India Campaign may well gain newfound momentum.
At this juncture, India needs a flexible and resilient telecommunication sector which has the potential to meet the newer demands and dynamic network traffic.
The current crisis has brought the need for three healthy private operators to serve 1.3 billion people to the fore.
As per a leading data and analytics company, it is also expected that COVID-19 will accelerate developments in advanced digital infrastructure systems, buoying investment justifications for 5G technology. Related investments around AI and machine learning in the post-COVID-19 era are therefore likely to follow.
It is recommended that the TSPs have contingency plans in place to cater to the novel demands of the present situation.
An adequate review of HR policies by TSPs should take place, to ensure that they are suitable and relevant in the current situation such as work-from-home, 24X7 work, and flexible hours at the work, etc. It is commendable that the DoT and the TRAI are working in tandem to effectively address the limitations faced by the TSPs.
(Ashish Prasad is a partner and Rohit Sharma is a senior associate with Economic Laws Practice. This is an opinion piece and the views expressed are the authors’ own. The Quint neither endorses nor is responsible for them.)
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