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Hiring Hiatus: Operators restructure roles, cut jobs to improve efficiency

March 30, 2012
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India’s telecom sector has been the centrepiece of its growth story, contributing significantly to the economy. From less than 1 million subscribers in 1998, the industry has grown exponentially to connect over 900 million subscribers as of January 2012. This rapid growth has been achieved through entrepreneurship, dynamic strategies and expert talent.

However, some of that sheen seems to be wearing off now. Last year’s 2G scam is taking a serious toll on the sector, which has been battling dwindling margins, declining revenues and falling quarter-on-quarter profits since 2009.

Moreover, the operators’ heavy investments in acquiring 3G licences are yet to pay off with service uptake still slow, contrary to operator expectations. The operators also face the prospect of having to pay heavy penalties for allegedly violating various regulatory directives.

Clearly, all’s not well with the Indian telecom sector. This started becoming apparent by mid-2011. Mobile subscriber additions slipped significantly, from nearly 20 million additions a month in 2010 to about 7 million in 2011. Operators decided to adopt a wait-and-watch attitude till there was greater clarity on regulatory and policy issues. Meanwhile, they pushed out their broadband wireless access (BWA) and long term evolution (LTE) roll-out plans, which, in turn, adversely impacted telecom equipment makers and other ancillary vendors.

A key indicator of the stress in the sector is the discernible slowdown in industry hiring. Operatirs who had been generating half a million jobs every year for the past three years have restricted fresh recruitment or redeployed resources. According to telecom analysts, the overall telecom hiring in 2011 came down by 70 per cent over the previous year as several operators put a freeze on hiring, except for a few strategic positions.

New players like Videocon and Loop Telecom are downsizing to remain viable while companies like Etisalat and S Tel have quit the telecom business after the Supreme Court cancelled their licences in February this year, adding to the job losses.

“It has been quite a year as far as hiring is concerned,” observes Dr Mahesh Uppal, director, ComFirst. “It has been particularly slow and subdued in the telecom services domain. These are very fluid times for the telecom industry; therefore, it is understandable that companies have very diverse motivations for hiring and firing people. Both companies and employees are responding to market pressures.”

Alarmed by the declining profits for more than 10 consecutive quarters, many companies in 2011 decided to undertake a massive clean-up operation and cut flab. Bharti Airtel was the first to undertake a comprehensive restructuring in August 2011. Tata Teleservices Limited (TTSL), Reliance Communications (RCOM), Aircel and, more recently, Vodafone followed suit.

Following the corporate reorganisation and the resulting uncertainty, over 10 senior professionals in key telecom companies resigned in the last seven months. Among them are Syed Safawi of RCOM; Atul Bindal of Bharti Airtel; Shamik Das of S Tel; Gurdeep Singh, Mallikarjun Rao and Rahul Saigal of Aircel; and Sushil Prakash and Pankaj Sethi of TTSL.

“The telecom sector is a high-churn space,” says Harish Bijoor, brand expert and chief executive officer (CEO), Harish Bijoor Consultants. “Besides, executive burnout is high. Most executives make job moves to experience better environments and benefit from better packages. Everyone knows that there is an expiry date to ability and to milking higher packages.”

Mohammad Chowdhury, executive director and leader, telecoms industry, PricewaterhouseCoopers, sums up the job trends in the industry thus: “In 2011, we saw two trends: significant executive movement as service providers searched for talent and a rationalisation in operations due to process efficiencies.”

Going forward, this trend is likely to continue as telecom service revenues and profits remain under pressure. This may change for the better in mid-2012, after the National Telecom Policy (NTP) is announced.

Restructuring drive

According to analysts, the Indian telecom industry is shifting gear and is now entering a phase where quality is more vital than quantity. Service providers will be focusing on streamlining operations to cater to the business-to-consumer and business-to-business segments more effectively.

In this context, experts agree that restructuring can play an important role as businesses have grown and selecting the appropriate strategic options to push business has become crucial. “It helps achieve efficiency in processes and saves costs,” says Shobit Khare, telecom analyst with Mumbai brokerage firm Motilal Oswal.

All the key players – most of them battling identical issues like a high debt burden, low tariffs, slide in growth rates and high marketing spends – have adopted this strategy.

Bharti Airtel

With its net profits sliding quarter on quarter, Bharti Airtel undertook a major restructuring exercise to cut costs and improve process efficiencies. It merged its mobile, satellite TV (DTH), fixed line and broadband telemedia businesses, which together account for about 90 per cent of the company’s revenues and the majority of its workforce, into a single entity. Senior Bharti officials say this is in line with the company’s growth strategy, which aims to remove layers in order to make the company more agile and allow faster decision-making.

Undoubtedly, the exercise is good for the company. But knocking the three divisions into one creates large-scale redundancies, mostly because the three verticals had separate teams for strategy, sales, product and finance, and were led by separate CEOs. Media reports suggest that more than 2,000 jobs have been axed; however, there are no definite figures. Significantly though, Airtel’s headcount has gone down from 26,144 in June 2010 to 16,545 (as per 2011 estimates). However, a senior company official clarifies that the majority of the affected employees have been offered opportunities to work in the group’s other businesses and in its Africa operations.

TTSL

The company undertook its restructuring exercise in two phases. In January 2011, the Tata Group announced top management changes for three companies – Tata Communications, TTSL and Tata Teleservices (Maharashtra) Limited (TTML). N. Srinath, managing director (MD) and CEO of Tata Communications took over from Anil Sardana as MD of TTSL and TTML. Vinod Kumar, president and chief operating officer (COO) of Tata Communications, took over as MD of the company.

In October, TTSL integrated all its service offerings under a single brand, TATA DOCOMO, with the aim of reducing its operational costs and streamlining its overall business. Prior to this, the brand was used only for the operator’s GSM-based mobile services. The restructuring consolidated TTSL’s organisational assets – spectrum, retail touch-points, digital footprint and consumer franchises – across various technology platforms.

According to Deepak Gulati, executive president, mobility business, TTSL, the restructuring meant that TTSL’s CDMA, GSM, 3G and Photon platforms would now be available under the unified TATA DOCOMO brand. “This will enable our consumers to upgrade to new possibilities in voice and data services, and avail of all services under a single brand. They will no longer have to go through multiple touch-points for our various brands.”

Moreover, phasing out brands, including Tata Indicom, Tata Photon and Walky for its CDMA, internet data card and fixed line services respectively, was expected to help customers choose a particular service easily. Also, it would help the operator direct its advertisement spends mostly towards TATA DOCOMO. This would improve customer recall and help the company save costs on separate advertisement campaigns.

Reliance Communications

RCOM reorganised its wireless service operations in September 2011. According to the company, the restructuring has helped it achieve a leaner, flatter structure. This will help in strengthening its customer-centric service vertical, which includes sales, distribution and customer service, and consolidate its back-end operations to deliver higher value to customers.

Initially, the company’s existing business units in the northern, southern and eastern regions were consolidated into a single entity. All the support functions including customer services, IT operations, and networks and products were moved to the new services division, being led by Nilanjan Mukherjee. Mukherjee was previously heading RCOM’s operations in the northern region.

Soon after the restructuring, three of the company’s top executives resigned. Reportedly, Arun Sur, telecom adviser to the company, and Jagbir Singh, the company’s networks head, moved to ZTE Corporation and Bharti Airtel respectively. They were followed by Safawi, RCOM’s wireless business head. Shamik Das, who was S Tel’s CEO, joined RCOM as joint president and COO of its wireless business. As per the new structure, Das is expected to oversee all of the operator’s geographical divisions.

According to company officials, the restructuring, when complete, is expected to improve the “teeth-to-tail” (front-end staff to back-end staff) ratio of RCOM’s wireless business from 60:40 to 75:25.

Market experts say that the restructuring exercise has made 10 per cent of RCOM’s 7,000 executives redundant and led to the redeployment of another 2,000 employees to “field functions”. Nevertheless, as a company official points out, the “restructuring was not about headcount rationalisation but getting the right resources at the right places”.

Aircel

Facing heavy debt over its 3G licence acquisition and intense competition, Aircel undertook a restructuring exercise in October 2011. The company decided to align its businesses under two broad categories: operations and network. The operations division comprises Aircel’s go-to-market strategy, branding exercise and subscriber additions, while the network division comprises the active infrastructure segment.

As per the original plan, Aircel’s COO Gurdeep Singh was to lead the operations division while Sudhir Mathur, chief financial officer (CFO), would head the network division. Both Singh and Mathur were to report to Sandip Das, CEO of Aircel and Maxis Communications.

However, even as the restructuring exercise was under way, Gurdeep Singh and chief technology officer Mallikarjun Rao resigned, reportedly owing to apprehensions over the change of guard.

Vodafone India

Aiming to strike a better balance between operational intensity and the need to focus on emerging areas, Vodafone India decided to restructure its top management team in January this year. “The restructuring is expected to allow for better opportunities for our teams to take on larger roles and prepare ourselves for the future,” comments Marten Pieters, MD and CEO, Vodafone India.

Under the new structure, the company has created two new roles, COO and chief commercial officer. Sunil Sood, director, business operations for the south and west regions, has been appointed COO and Sanjoy Mukerji, director of business operations in the north and east regions, has been appointed the chief commercial officer. Both will report to Pieters.

The position of chief marketing officer (CMO) has ceased to exist under the new structure. Kumar Ranganathan, the current CMO, has been given a global role to work on the group’s commercial functions. In addition, the company has created the role of director, external affairs, responsible for corporate communications, public affairs and the Vodafone Foundation. Explaining this step, Pieters says, “A non-regulatory government focus will become critical in the future, given our plans to list the company.”

A new position for business development and innovation has also been created. It will be headed by Jonathan Bill, currently senior vice-president, internet and data services.

Future scenario

“In the next few months, we will see the market become more stable and predictable. The demand for staff, in the very short term would decrease if several companies exit the market. However, I expect subdued activity in the hiring space post the stabilisation and settling down of the market. We will see a slightly different type of telecom market where voice will not drive the business as it used to until recently. A different types of expertise, particularly pertaining to data services, will be required. So people with a different skill set will be employed,” comments Uppal.

For now, it is mostly telecom operators that have been resizing their mainstream mobility business, having acquired multiple layers at the top, and overstaffed in the middle and junior levels.

On the other hand, some telecom clusters have been picking up talent. These include the mobile banking segment, telecom infrastructure companies, global equipment makers, value-added service providers and 3G business divisions. These segments are expected to continue adding capacity in the coming years. For example, equipment vendors such as ZTE, Huawei, Nokia Siemens Networks (NSN) and Alcatel-Lucent, which have been awarded contracts to roll out 3G and 4G networks, will be looking for competent personnel. They will essentially focus on hiring professionals in the areas of network routers, tower and switching operations, product development, testing, network, routing protocol, call processing, administration, and operation and management.

Going forward, the roll out of BWA services will give a fillip to the telecom job market. Besides, the Cellular Operators’ Association of India notes that the demand for telecom engineers, and sales and business development personnel will increase by 1-2 per cent in the coming years. A PwC study estimates that the telecom sector will generate 10 million jobs by the end of 2012. This includes 2.8 million direct jobs and over 7 million indirect jobs.

In all, with the NTP, 2012 expected to be announced in April, there should be greater policy and regulatory clarity in the sector, paving the way for future growth. With more stability towards the end of the year, the industry inching closer to the 1 billion subscriber mark and the launch of 4G service, the need for talent will increase. The year-end could well see a reversal in the current slowdown in hiring.

 
 
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