VR Logo

Communication: Winners & losers of COVID

The communication sector has proved to be a key connectivity enabler at a time when the world has been forced to stay indoors

Communication: Winners & losers of COVID

Since the imposition of COVID-19-related lockdown, 'work from home' and 'social distancing' have become the business norms. In this new business environment, communication companies are putting their best foot forward to bridge the gap between conventional business practices and the emergent requirements of the new normal. The rapidly growing remote-working culture because of travel restrictions, coupled with restrictions on social gathering and cancellation of events, has resulted in conducting meetings over video conferencing. Further, with OTT having gained popularity as the major entertainment source, there has been a sharp increase in the demand for better network infrastructure and connectivity. Amid all, the entire sector has witnessed a revenue increase of 11.5 per cent on a year-on-year basis.

At present, the plan is afoot to roll out 5G, with Reliance Jio's chairman, Mukesh Ambani, emphasising the early incubation of the 5G network. However, Sunil Mittal, Chairman of Bharti Airtel, has informed that it may take two-three years for the domestic telecom industry to be ready for 5G services. The rollout of 5G services is expected to affect revenues and capex projection for the telecommunication sector in the near future.

Winners

Affle: Being in the mobile-advertising space, the company grew on the back of increasing demand for mobile advertising. The higher adoption of smartphones and increased screen time have swelled the advertising budget. In the last quarter ending September, the company recorded sales of more than Rs 100 crore - for the first time in the history of its operations.

A tech company, Affle uses an asset-light model that allows it to scale up its operations at a very low cost, resulting in sustainable profits and positive cash flows.

Bharti Airtel: Rapid demand for internet services, driven by the work-from-home culture, online education and popularity of streaming services, has led to an increase in the revenue of this telecom giant. The company witnessed the addition of 14.4 million new subscribers in the quarter ending September 2020. On the other hand, the average revenue per user (ARPU) for mobile subscribers improved from Rs 157 to Rs 162.

Adding to it, the Supreme Court's order on AGR dues came as a big respite to the company. The company posted profits after losses for five consecutive quarters.

Losers

Sterlite Technologies: It manufactures fibre optics and cables. Although there has been a growing demand for telecommunication services, the company has failed to reap benefits. Since the COVID-19 pandemic has delayed capex plans for many telecom companies, the demand for fibre optics has plummeted, resulting in lower revenues for the company.

Even though the first two quarters of the current fiscal did not augur well for the company, the management is optimistic about the future. The company's order book has been at its all-time high of Rs 10,705 crore and Sterlite has recently bagged a Rs 700 crore order from Airtel to build optical networks in 10 circles.

Vodafone Idea: This telecom operator has been losing its competitive position mainly because of a decreasing subscriber base, poor network quality and mounting debt on its balance sheet. The company posted a loss of Rs 7,218 crore for the quarter ended September 2020.

The loss in subscribers owing to the entry of its rival Jio has been the biggest dent to this company. The debt-ridden company has a very limited scope to increase its capex without any external funding and its total debt stood at Rs 1.1 lakh crore as of September 2020, with AGR dues of more than Rs 50,000 crore.