Telecom sector may be hit as recession bites

By siliconindia   |   Thursday, 09 April 2009, 20:08 IST   |    1 Comments
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New Delhi: If you think that telecom is the only one sector which is unaffected by the present financial slump, you are wrong. Indian telecom sector may witness a slowdown in the growth rate by the end of this year due to the decline in household spending. The growth rate of handsets could fall by as much as 50 percent and there would be a decline in the new subscriber additions also. "The handset sales growth in 2009 is expected to be in the region of 13-15 percent, down from 26 per cent last year," said Prashant Singhal, telecom industry leader at Ernst & Young. "Yes, the Indian telecom industry has been impacted to some extent by the current global slowdown. In the current economic environment, many corporates are re-negotiating the rates they pay to telecom operators. Though subscriber numbers are still growing at well over 10 million a month, revenues are not rising commensurately. Also, it will be a challenging market for mid- to high-end handset makers this year. In high-end phones, sales will be defined more by need rather than desire of the user," Singhal pointed out. According to a Mumbai-based multinational GSM operator, most of the growth in mobile usage is coming from non-urban areas driven by a large population of employed youngsters. However, if the liquidity crunch continues then these youngsters may not find employment easily, which in turn will impact their expenditure on communications services. Attempting to tackle the crisis, many companies have started taking up cost cutting measures including infrastructure sharing and internal restructuring. Meanwhile some other players in the telecom sector completely rule out any impact on telecom. "Look at it from the customers' perspective - slowdown or not, they need a communication device under all circumstances; to share their thoughts, worries, good news or even for a general discussion. So, the demand for telecom services remains strong, and that is evident in the strong growth that the sector continues to enjoy. In fact, telecom usage in innovative ways is actually increasing through the long-drawn recession, as it becomes a cost-effective alternative to business expenses such as travel and lodging," mentioned a spokesperson for Tata Teleservices.