The Covid-19 pandemic is one of the toughest challenges that has been faced in recent times. It has not only affected almost the entire world but has led to severe socio-economic disruptions. As unfortunate as this global health emergency is, it has brought to the fore the relevance and significance of telecom, technology and digitalisation in enabling day-to-day functions and facilitating business continuity.
During this crisis, remote working, video conferencing, and information and communication technology (ICT) have emerged as key enablers for business operations, and video streaming services have become the go-to source for entertainment, all of which are being supported by high capacity, high speed telecom networks.
Categorised as an essential service, telecommunications has been playing an important role in the functioning of the economy during the crisis. According to the Cellular Operators Association of India (COAI), the telecom sector has been contributing 30-35 per cent of GDP amidst the pandemic, besides the 6 per cent direct contribution.
With people confined to their homes to ensure physical distancing, the stress on residential broadband networks has been immense. There has been a sharp rise in the uptake of enterprise-grade bandwidth at home networks as usage of unified collaboration technologies, virtual office solutions and cloud services has grown manyfold. For instance, in the beginning of the lockdown, Vodafone Idea experienced a year’s worth of internet traffic growth on its networks in just a week’s time.
Over the past six months, telecom operators and internet service providers have reallocated their capacity from dense public spaces and corporate hubs to residential complexes to meet the surging data demand.
Trends in network usage
The pandemic has altered broadband usage patterns in significant ways, and this is likely to continue even post the outbreak. In terms of type of traffic, videoconferencing and collaboration tools are now dominating internet usage. Online video streaming has increased by 120 per cent in the past year and gaming by more than 80 per cent. Data traffic and internet usage during peak hours have continually seen new record levels. Further, while traditionally data usage has been mostly asymmetric, focused on downloads, it is now becoming symmetric as upstream traffic has grown substantially. There has been a clear shift in usage hubs, as most of the data consumption is now taking place in residential zones. With employees expected to carry on working remotely, workloads will continue to be migrated to the cloud.
Impact on the sector
The impact of Covid-19 on the operating and financial performance of the Indian telecom industry has been limited. In fact, the work-from-home concept has resulted in increased usage of both voice and data services. Mobile data usage has increased on account of increased video and related content viewing as well as increased time on social media, etc. Fixed broadband traffic has also witnessed a quantum jump on account of home working, remote schooling, content watching, etc. Users have upgraded their subscriptions to include more voice/data on their mobile plans and/or increased the speeds/data limits of their fixed broadband plans resulting in an increase in average revenue per user (ARPU).
Data usage per subscriber on Airtel’s networks increased from 11.9 GB in April-June 2019 to 16.6 GB during the corresponding period in 2020. ARPUs grew from Rs 129 to Rs 157 during the same period.
That said, there has been some revenue loss in terms of lack of physical recharges that are a norm for a sizeable portion of the population living in rural/remote areas. Moreover, there has been a decline in the country’s telecom user base. As per data from the Telecom Regulatory Authority of India, the industry observed a fall of 2.8 million in subscribers during March 2020. The user base shrunk further by 8.53 million during April 2020.
The crisis has also clipped India’s 5G aspirations, with technology roll-outs likely to be pushed out by a couple of years. 5G ecosystem development has been slow, owing to the industry’s elevated debt levels and high spectrum prices. The present situation has compelled operators to augment their capacity overnight and they have had to front-load capex from future quarters to the current months. Given that the sector is also grappling with the issue of payment of adjusted gross revenue-related dues, it will continue to be cash strapped with limited capex investments in new infrastructure roll-out over the short term.
As per industry estimates, smartphone sales will decline by 13-15 per cent in 2020 due to Covid-19, making it the first year of decline ever. The recent spate of job and salary cuts has resulted in customers postponing purchases whereas companies are unable to ramp up production, which is impacting supply of models. The recent increase in the goods and services tax (GST) on smartphones from 12 per cent to 18 per cent has also made handset models pricier.
Keeping these factors in mind, market research firm IDC has revised its estimates for the smartphone market in India to 130 million handsets from the earlier 140 million during 2020. Meanwhile, Counterpoint Research has adjusted its outlook pegging the industry at 137 million units from the earlier 142 million.
Further, the decline in sales of feature phones is estimated to be a steep 42 per cent, from 130 million handsets sold last year to around 75 million in 2020, with the income of this set of consumers being badly hit.
New-age tech bridged the gap
For India, which has been somewhat slow to adopt smart technology solutions such as automation, artificial intelligence (AI), augmented reality (AR) and virtual reality (VR), the Covid-19 crisis has prompted it to leap in. Enterprises, both large and small, have been compelled to realign their strategies and leverage new-age technologies and remote solutions to connect, communicate and collaborate.
Remote working has resulted in a demand for resilient, accessible and affordable cloud infrastructure. Cloud providers have been experiencing a demand surge of at least 35-40 per cent for data, cloud and co-location services.
Futher, AI, robotics and automotive solutions are being used to reduce the workforce. For instance, both Facebook and Google are relying on AI to remove inappropriate posts since the companies’ content moderators cannot review certain things from home.
AR and VR technologies are being used by event management companies to provide a real-world feel, for instance, of being at an expo or a conference.
Push towards digitalisation
The ongoing crisis will have a lasting impact on the way enterprises and individuals do business, with a major shift towards the adoption of digital technologies. This, clearly, is an inflection point for the accelerated deployment of agile technologies, especially by small and medium enterprises (SMEs).
SMEs, that have been slow adopters of internet-based services and applications, are now adopting virtual platforms and collaboration software. In fact, the use and adoption of technology is prevalent across various industries and verticals, with several examples of remote collaborations being encouraged across all walks of life. Schools and universities have cancelled classroom sessions in favour of online teaching and many industry events are being streamed online.
What seems to be a stopgap arrangement today is likely to become the new normal for organisations, which will increase digital operations in the coming years. Digitalisation and building strong integrated digital models will become essential rather than optional in the post-Covid era. Companies are likely to focus on strengthening their technology backbone as digital media, video content, online gaming, and voice over internet protocol apps will continue to see increased adoption post the crisis.
Rise of digital indoor connectivity
Indoor broadband connections will gain impetus as more people will subscribe to fixed broadband for their homes owing to better speeds and greater reliability. Further, there will be 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.
The industry may see large-scale investments by existing telcos and internet service providers to expand their fibre-to-the-home (FTTH) networks. Building FTTH infrastructure is also synergetic with towercos’ existing business play and they too may choose to explore the opportunity now. Venture capitalists and private equity players that have so far stayed away from smaller fixed line operators may come back with investments for companies that are ready to innovate.
A silver lining
The Covid-19 pandemic has accelerated India’s transition to high speed broadband and digitalisation by at least a decade. The crisis may indeed prove to be a game changer for India’s digital landscape and expedite the transition to a digital economy. The telecom sector should seize this opportunity to transform itself into a digital communications and infrastructure sector to tap new revenue streams.
Akanksha Mahajan Marwah