Hetal Gandhi, Director, CRISIL Research

Ankit Jain, Assistant Vice President, Corporate Ratings, ICRA Limited

Murtuza Onali Kachwala, MD, Protiviti India

Inderpreet Kaur, Senior Analyst, Asia Pacific OMDIA

Rajan S. Mathews, Director General, COAI

TV Ramachandran, President, Broadband India Forum

Telecom services have been a critical element in managing the ongoing Covid-19 crisis. Telcos along with other industry stakeholders are leaving no stone unturned in providing seamless connectivity during these testing times. However, their financial and operational businesses seem to have been impacted by the lockdown. Thus, the near-term outlook for their finances remains bleak. Industry experts discuss the likely impact of Covid-19 on telcos’ business and revenues, steps they are taking to cope with the surging data demand and the way forward…

How is the ongoing Covid-19 crisis likely to impact telcos’ business and revenues? What will be the positives and negatives?

Hetal Gandhi

The impact of Covid-19 on the telecom service industry will be relatively minimal. From the connectivity and mode of entertainment standpoints, the industry is providing the most critical services amidst the crisis and is likely to see increased demand for both data and voice services as people spend more time at home during the lockdown. Subscribers will choose packs with higher validity and data allowance, thereby increasing the ARPU, which is expected to settle at Rs 140-Rs 150 in 2020-21 given the recent tariff hikes and drive a larger proportion of revenue growth.

On the downside, with retail stores closed down, new subscriber additions are likely to get impacted. Also, the smartphone market is likely to receive a supply shock if the situation does not normalise by the first quarter of 2020-21, pushing up the prices and slowing down 4G adoption. Telcos may also see their network equipment get costlier, thus raising their input costs. Further, telcos  have decided to extend the validity of their tariff packs for feature phone users to ensure service continuity for the bottom end of the subscriber base. This is likely to adversely impact annual revenues by 1-1.5 per cent. However, the revenue impact will be partially offset by urban subscribers recharging with long-term data plans as work-from-home (WFH) policies are likely to create a surge in data demand. All in all, Indian telecom players may continue on the path of double-digit revenue growth.

Ankit Jain

Post lockdown, India has started working from home resulting in the increased usage of telecom services, both in terms of voice and data. That said, there has been some revenue loss due to the lack of physical recharges and limited new subscriber additions. Telecom, categorised as an essential service, has been functional even during this lockdown. In fact, it is playing an important part in the functioning of the economy. Thus, ICRA expects a limited impact of the coronavirus on the operating and financial performance of the Indian telecom industry.

There has been a sharp fall in the monthly customer addition during March 2020, which is expected to continue till the lockdown prevails and even after that, till movement remains constrained. Further, MNP requests have reduced due to the mandatory physical presence of the customer for completing the KYC process. Telco revenues are also likely to be impacted due to the lack of physical recharges, which were a norm for a sizeable portion of the population living in rural/remote areas. The telcos have granted additional talktime to low-income customers and extended the validity of prepaid recharges till April 17 to allow the continuation of incoming calls. This is expected to put some pressure on telco revenues in the ongoing quarter.

Apart from the financial aspect, there are other issues that can impact the industry. Remote working increases security- and infrastructure-related risks for telcos as well as their customers. The excessive demand for mobile and communications networks, especially in terms of usage, could impact service quality and the telco’s brand in the coming times. The availability of equipment – customer equipment (including mobile handsets) and other network equipment – has been impacted, which may defer network deployment and customer upgradation. 5G testing and deployment, which has already been delayed on account of the elevated debt levels of telcos and a limited ecosystem around the band, may get deferred even further due to the ongoing situation.

Murtuza Onali Kachwala

The coronavirus outbreak is causing widespread concern and economic hardship for telecom operators, consumers and industries across the globe. Before the outbreak, operators were already in a financial crisis as they had to pay Rs 775.74 billion adjusted gross revenue (AGR) dues to the Department of Telecommunications (DoT). In the current situation, telecom operators are estimating a sharp drop in new subscriber addition. In a regular month, the average net addition is 3 million subscribers, but this March, it may come down to well below 1 million because of the virus impact, as per the Cellular Operators Association of India (COAI). Further, it takes 30-45 days for a new subscriber’s bill to reflect in the revenue and therefore, the impact of low subscriber addition will show only in the first quarter of the new fiscal year starting April 2020. Also, there will be a disruption in the import of new equipment for network expansion. Since the majority of 4G roll-outs are already done, network expansion is the least concern for operators.

But all of it is not negative. There is a silver lining to this outbreak. The move by companies across India, asking staff to increasingly WFH, is slated to boost data consumption and trigger a sharp jump in demand for home broadband and virtual private network (VPN) services in the coming weeks, creating fresh enterprise revenue opportunities.

Inderpreet Kaur

The global mobile industry is expected to take a hit in 2020 as a result of the Covid-19 crisis. Taking early cues from China, where the industry reported a significant loss in mobile subscriptions during the lockdown, we anticipate a similar impact on other markets. Nationwide lockdowns are impacting retail sales while displacements in migrant worker population are adding to the net subscription loss in highly penetrated multi-SIM markets like India.

As per research published by OMDIA (previously Ovum), mobile revenues will be down 4 per cent worldwide, though the regional impact will vary. Asia will see mobile service revenues decline 2 per cent year on year to $298 billion in 2020, representing a loss of $7 billion. India will be no exception. While we do not expect revenues to decline in 2020, there is a downgrade in growth expectations for Indian operators. The limited presence of fixed broadband infrastructure will encourage mobile broadband data consumption, translating into improved data revenues.

Rajan S. Mathews

Following the lockdown, there has been a surge of around 20 per cent in data usage due to WFH. The load on the network has increased significantly and telecom companies have proactively taken measures to manage the network load. Further, the lockdown has adversely impacted subscriber additions. We have written to the government, seeking approval for the self-KYC process on subscriber verification for issuing SIMs to new mobile subscribers and enabling SIM exchange using online facilities.

Telcos, with support from the government, have been able to provide seamless service to users in such a hard time. Over the past few days, the industry has witnessed a flattening of traffic demand on networks. This has been made possible by the active engagement of telecom services providers with stakeholders such as streaming platform players, state governments and DoT. These actions include streaming platforms moving from high definition to standard definition (SD), local municipalities working with telcos to bring sealed towers back online, and redistribution of traffic on the network.

T.V. Ramachandran

The digital communications sector has emerged as the only lifeline for people in the country, connecting them when social distancing/physical isolation is necessary to prevent the spread of Covid-19. The sector is efficiently servicing the nation by powering key services – healthcare, banking, insurance, supply chains and many more – in this crisis. Broadband connectivity is facilitating near-normal operations and business continuity from homes. Over-the-top (OTT) and other digital service platforms are also playing an important role in providing and facilitating remote video and virtual connectivity solutions through various applications/platforms.

Mobile broadband being the primary source of connectivity across India, the high capacity utilisation of existing networks is likely to affect the quality of services. In order to address this, we earnestly recommend that the government considers adopting similar measures as that taken by the Federal Communications Commission (FCC), USA, whereby an extra spectrum boost could be provided to the telcos to ensure full-scale broadband connectivity.

Are telecom networks prepared to cope with the surge in data demand? What steps can be taken to further enhance network capacity?

Hetal Gandhi

The data surge is likely to cause some congestion in wireless networks. However, we believe that the telcos have adequate spectrum to cope with the data surge, especially after video-based apps such as Netflix, Hotstar and Amazon Prime have reduced their default resolution. This reduction in video quality will offset the rise in data usage to a large extent as 65-70 per cent of Indian data consumption is video based. WFH policies have also resulted in increased subscriptions of wired broadband that will also help partially offload data from wireless networks in urban areas. Telcos will also try to front-load the capex earmarked for 2020-21 and invest in network infrastructure like massive MIMO to address capacity concerns, and 4G eNodeBs and small cells to address coverage concerns.

Ankit Jain

While increased data usage is a positive for the industry, it also exerts pressure on the network capacity. Thus, telcos are prioritising their investments to keep 4G networks and fixed line networks up and running. They are focusing on their network capacity to tackle the sudden increase in data consumption and ensure uninterrupted mobile broadband connectivity to their customers amid the nationwide lockdown. Further, telcos have tied up with ATMs, pharmacies and grocery stores to enable recharges for customers who are solely dependent on physical recharges.

Murtuza Onali Kachwala

The COAI estimates that data consumption on average has increased 30 per cent in the lockdown period so far. India has about 687.62 million internet users, of which only 22.26 million are wired broadband users while the remaining are mobile or “wireless” internet users. India is in a lockdown, which means WFH, education and entertainment are being transferred to the home broadband network or wireless mobile connections. Since operators were not ready for this, consumers across the country have seen their network average speed being reduced significantly. This is expected to get worse as speeds are expected to go down by another 25-30 per cent with the increase in internet usage, clogging the networks as the country stays locked down. The government has conveyed to all online streaming platforms like Netflix and Amazon to downgrade their content to SD to free up bandwidth.

The telcos’ first priority will be network uptime, followed by appropriate quality standards. To enhance network capacity, telecom operators should request the government to allow sharing of active infrastructure between ISPs so that cellular operators can offload their data traffic to them. Telecom operators may roll out cells on wheels to ease network congestion. Similarly, to support telcos, wireless spectrum must be liberalised and necessary steps must be taken to maximise the backhaul spectrum.

Inderpreet Kaur

Mobile phone companies around the world are seeing spikes in usage as governments are enforcing social distancing and WFH to slow the spread of Covid-19. Operators and regulators are already taking multiple measures to deal with this increase. Examples from few a developed markets such as the US and Australia suggest that regulators and governments are actively involving themselves by releasing temporary spectrum and additional bandwidth on their national broadband network. FCC has granted Verizon temporary spectrum access to meet the increased customer demand for broadband. NBN Co. in Australia is offering a 40 per cent boost in bandwidth to retail service providers, and is waiving additional coverage charges for using this capacity. In India, OTT service providers have collaborated to stream in SD in order to reduce the burden on networks.

Rajan S. Mathews

To tackle the increase in data demand due to Covid-19, the densification of telecom infrastructure is required. Thus, the growth of fibre is very important to provide improved quality of services. As people and organisations stay remotely connected, fiberisation will help meet the present requirement of bandwidth and support future technologies such as 5G.

During the pandemic, the government has identified mobile and internet infrastructure as an essential service and it is now time that due status is given to mobile services similar to that of water, electricity, etc. Telecom service providers are under immense financial pressure due to liquidity crunch. In spite of that they have been at the forefront of the battle against Covid-19, providing undisrupted connectivity to over a billion Indians. As a facilitator of essential services, the telecom sector should not be seen as a cash cow for revenue maximisation. Instead, speedy rationalisation of telecom levies should be immediately considered to provide relief.

T.V. Ramachandran

The networks are fully operational and industry personnel are working 24×7 to maintain and provide uninterrupted service to the people, despite the immense pressure of increased usage. To ensure the optimal delivery of services, it is imperative that the digital communications sector be treated as an essential service as advised by the central government, and access is provided to critical cell sites and access nodes at all times for continued operations and maintenance, even in the midst of the lockdown.

Although India stands as the second largest market for telecom users in the world today, the spectrum allocations to our service providers need to be provisioned likewise. Further, only about 20 per cent of telecom towers in India are fibre connected, which limits operational efficiency, especially in providing backhaul support. Therefore, it is highly recommended that the government incentivises fibre roll-outs and allocates fresh spectrum resources to service providers urgently.

In addition, there is a need to increase the use of satellite broadband. Barring a few use cases such as satellite backhaul or VSAT, India has very little satellite broadband. It requires satellite bandwidth capacity from domestic private enterprises to augment its existing capacity, which is being provided through the ISRO. Besides, there is nearly 10 Gbps of bandwidth over India, provided by foreign satellite companies, which is currently lying unutilised and can be tapped. The roll-out of public Wi-Fi also needs to be accelerated. Further, adopting the TRAI-recommended WANI architecture could facilitate seamless Wi-Fi roaming. Broadband India Forum (BIF) recommends the adoption of WANI 2.0, which can provide access across technologies in a truly seamless manner. Airwaves in the E and V bands, also known as wireless fibre, need to be deployed and utilised optimally.

With the increasing number of people using digital applications/platforms for day-to-day transactions, it is imperative that the digital application/e-commerce ecosystem is nurtured and developed further for deriving maximum benefits.

Finally, digital infrastructure in the country needs to be enhanced so as to plug the gaps and vulnerabilities that have been laid bare by the Covid-19 situation, and further prepare for advanced fool-proof measures for future catastrophes that may arise. Liberal policy and regulatory guidelines to incentivise fresh investments in infrastructure are a much-needed measure in this regard.

How do you see the Indian fixed broadband market evolve amid the lockdown? What will be your medium-term outlook for this space?

Hetal Gandhi

With only 6 out of every 100 households having a connection, India has one of the lowest fixed broadband penetration rates in the world. Owing to the outbreak of Covid-19, most corporates have facilitated WFH for their employees as a part of their business continuity plans (BCPs), which has led to a temporary spike in wired broadband requests. However, the operators have not been able to service all the requests due to the lockdown. WFH is likely to continue at least till mid-May amidst calibrated exits from the lockdown, which is further likely to create demand for wired broadband subscriptions after the lockdown is relaxed. Hence, the outbreak of Covid-19 is likely to create a surge in demand in the short term and may be the much-needed trigger to increase wired broadband penetration.

Extremely low pricing of wireless data has ensured that wired broadband remains underpenetrated in India. Also, the increasing affordability and popularity of smartphones has ensured that most of the data consumption needs of Indian users are met by mobile connections. However, with the wireless market now being a consolidated space, we expect the players to gradually increase tariffs over the next two or three years. This is likely to prompt subscribers in semi-urban and rural regions to explore wired broadband connections, which offer higher speeds and data limit and will also be able to compete with the wireless pricing.

Ankit Jain

Mobile usage has increased significantly not only due to the WFH regime, but also on account of increased data usage for watching videos, content, increased time on social media, etc. Fixed broadband traffic has also witnessed an increase due to features like home working, remote schooling and content watching. Thus, some subscribers have upgraded their plans to include more voice/data to their mobile plans and/or increase the speeds/data limits in their fixed broadband plans resulting in ARPU uptrading. Further, due to the unavailability of physical recharges, there has been a shift towards digital recharges, which has led to a reduction in dealer commission and thus improved profitability for telcos to some extent. ICRA expects a revenue growth of 18 per cent in 2020-21, while the industry EBITDA is expected to grow by 21 per cent to Rs 750 billion, on the back of increased usage and tariff hikes announced in December 2019.

Murtuza Onali Kachwala

The Indian consumer has preferred mobile data to fixed broadband. This may change with the national lockdown. Telecom operators will be the main beneficiaries as they are the main enablers of such virtual platforms that minimise business disruption. India’s current home broadband and enterprise business services market opportunity is Rs 300 billion-Rs 340 billion. If the pandemic outbreak is prolonged, the combined opportunity for the Indian fixed broadband market may rise to 25-30 per cent in the medium term.

Inderpreet Kaur

WFH may add new service requirements. However, in mobile-first markets like India, a large portion of this demand will be met through dongles and mobile broadband. Network roll-outs are disrupted, therefore restricting network coverage and expansion to new areas. Limited operations will restrict the availability of site engineers to install new connections, impacting customer acquisitions during the lockdown period.

T.V. Ramachandran

Post Covid-19, WFH may become the new norm and the clear shift towards fixed broadband will lead to demand-side pressures on home and fixed broadband, which will cater to this sudden spurt in indoor coverage demand. This entails huge investments in fibre roll-out inside buildings, to the curbs, and right inside the homes, to take care of the surge. Simultaneously, we are likely to see an emphasis on in-building coverage through a slew of means, which would include the creation of Wi-Fi hotspots and providing additional spectrum in the sub-700 MHz bands to enable indoor penetration.

What are some of the key telecom technology trends that are expected to gain traction in India owing to the pandemic?

Hetal Gandhi

  • Wired broadband connections will gain impetus as more people will subscribe to fixed broadband for their homes owing to better speeds and reliability.
  • The Covid-19 pandemic has reaffirmed the importance of having BCPs in not only large firms, but also small firms. Post this pandemic, small and medium enterprises (SMEs) are likely to prepare their BCPs, which will be positive for the VPN and cloud services market.
  • As contactless behaviour increases, more people will start using secured digital payments.
  • Digital media, video content, online gaming, VoIP apps like WhatsApp and Skype will see increased adoption post the crisis.

Murtuza Onali Kachwala

The coronavirus pandemic is a generation-defining event, sure to change many paradigms of our daily life. From handshakes to office work, we are coming to re-evaluate what we perceive as normal. It is also forcing us to reappraise how we use technology. Two areas that we expect to gain most from new technology during this pandemic are healthcare and remote education. With support of the upcoming 5G technology, health workers can perform mass surveillance of patient movements and warn citizens if they come in contact with a patient. Low latency, consistent, high quality video streaming will allow medical personnel to accurately assess patients remotely, which will help relieve the diagnostic burden on local physicians.

Telecom will also facilitate a new wave of medical robotics innovation, with robots delivering drugs, checking patients’ temperature, delivering advice, and disinfecting rooms within hospitals, once again reducing the need for human exposure. The next-generation technology is already helping alleviate the stress of mass home schooling, with a host of new solutions being released to help students feel immersed in their remote classrooms. Emerging 5G technologies, like virtual and augmented reality, and holography, will give children an interactive experience.

Inderpreet Kaur

A clear implication is the use and adoption of technology across various industries and verticals. Just three months into the crisis and we are already seeing many examples of remote collaborations being encouraged across all walks of life. With the biggest of technology events being moved to digital platforms, corporates have already shown their acceptance of the virtual route. Universities have cancelled classroom sessions in favour of online teaching and many sporting events will witness empty stadiums as fans will turn to streaming online.

During the crisis, remote working has emerged as a key to business continuity planning. Vendors such as Cisco and Microsoft are offering free access to enterprise-focused collaboration solutions. Service providers are also acting swiftly by supporting small business customers in their BcPs through a variety of packaged solutions at promotional rates. What seems to be a stop-gap arrangement today might well become a way firms operate over the coming years. The SME segment, which has traditionally lagged in adopting new technologies, will open up to embrace digital solutions.

Rajan S. Mathews

With people using various digital tools to get connected and overcome the challenges of working from home owing to the pandemic, telcom networks are becoming more efficient at dynamic network management. Post Covid-19, e-health solutions like telemedicine and online education tools will also see a rapid uptake. Innovation around AI and machine learning tools will receive a boost.

T.V. Ramachandran

This outbreak has led to a major shift in usage patterns as well as the location of use, with almost everyone operating out of their homes. This is likely to lead to the extensive use of data at home and greater use of fixed broadband services. Further, we are likely to see a new stimulus for innovative and reliable in-building solutions such as fibre-to-the-buildings and creation of new Wi-Fi hotspots inside buildings, along with the increasing importance of sub-GHz bands for mobile broadband services due to their superior propagation characteristics.

In dense urban areas, where fibre deployment is likely to be a challenge, we expect the use of E and V bands to take place in the medium term. We also expect the extensive use of satcom in the coming months, and the addition of more towers and antennas over short hauls.