Dark clouds of job cuts loom over the telecom sector. The risk running with mergers is that as many as 10,000 employees may lose their jobs over the next year.
With many telecom companies joining hands to beat competition and cut costs, some industry employees are having restless nights out of fear they may lose their jobs.
A report in the Hindu BusinessLine today, quoting industry sources, says that thanks to the spate of consolidation recently, as many as 10,000 employees may lose their jobs over the next year.
A large merger, such as the one announced between Idea and Vodafone earlier this week, tends to many job roles redundant at participating companies due to duplication.
“Some departments may have surplus employees. Jobs like telecallers or ground-fleet salesmen would be too many in number and a good portion of them might have to be let go,” Dinesh Goel, Co-Founder & CEO, Aasaanjobs, told Moneycontrol.
Telecom companies are generally bottom heavy with a lot of entry level staff for sales and back office operations, he added.
Other support teams like finance and legal may also see surplus of employees, which will result in layoffs.
Companies that are coming together
Analysts say the Vodafone and Idea merger announced Monday could be a step that could change the face of the telecom industry — in that it would also change the employee needs of these companies.
In particular, the merger could take away 7,000 jobs, according to the HBL report, while another 3,000 could be from Reliance Communications and Aircel merger.
Idea and Vodafone are looking at saving around USD 2.1 billion through synergies and the obvious way to cut costs would be let go of employees as human resources cost a significant amount to the telecom companies.
Quantum of job cuts the industry may see
Goel expects a 20 percent job cut in the industry. “This will help the merged entity reduce the cost pressure and showcase better Earnings before interest, tax, depreciation and amortization (EBITDA) numbers,” he said.
While joining forces, companies look at better usage of the available workforce. The merger also slows down business development activities as the combined entity will have access to more markets, compared to any individual entity.
The timeframe that Goel expects for the layoffs is anywhere between 6 to 12 months post mergers. “It would generally take companies up to 6 months to consolidate the new teams and measure their performance as a combined entity,” he added.
Will consolidation leave employees with no jobs at all?
Goel has a positive outlook for the telecom industry as India is on the cusp of mobile and internet penetration.
He says that demand for experienced workforce in the sector is far greater than the supply of talent.
“Mergers should not render people unemployed, as the market would be able to absorb the laid off talent,” he added. Also, employees in tier-2 cities can be less worrisome as telecom companies are aiming to expand there.