Reliance Jio Infocomm sharply reduced the number of contracted employees, along with some permanent staff, as it strives to cut costs and improve operating margins, which fell in January-March, said people familiar with the matter. The telco, however, said it continues to be a net recruiter and there was no question of any “cost pressure-led action”.
While major redundancies have been on the consumer-facing side, other impacted areas include supply chain, HR, finance, administration and networks, said the people mentioned earlier.
“We are expanding our consumer businesses and Jio continues to be a net recruiter in the industry. We also work with contractors who may be hiring staff on fixed time contracts for our various project construction activities. Given we continue to recruit actively, the question of a cost pressureled action is not relevant,” a Jio spokesperson told ET.
People familiar with the matter said the company has let go of some 5,000 people, of which 500-600 are permanent employees and the rest are contracted. But this couldn’t be independently verified.
“The impact has been mostly in the customer acquisition segment,” said one of the people. The manpower rationalization started at least a quarter ago, and is expected to continue.
No Cost Pressure-led Action, Says Jio
“Managers have been told to reduce team sizes. The areas that are getting impacted are administration, supply chain, finance and HR,” said another person on condition of anonymity.
Sources said Jio has 15,000-20,000 employees on its payrolls. However, there is a much larger number that works for the operator but are third-party employees. Third-party employees can be employed by a staffing firm which in turn gets payments from the company hiring them, in this case Jio.
The company didn’t comment on specific numbers.
“When Jio came into the market, it needed more hands on the ground. But with one network, no segmented offers, the focus is on content and enterprise segment. Its operating leverage (margins) have remained stable in the past two years. They were expected to increase it a lot more, which is a concern,” said a senior telecom analyst with a top brokerage.
For the January-March quarter, Jio’s earnings before interest, tax, depreciation and amortization (Ebitda) margin fell 5 basis points on quarter to 39%, with total expenses rising almost 8% on quarter, mainly on the back of higher network operating costs, finance expenses, and depreciation and amortization charges.
Employee costs typically range 5-6% among telecom operators and companies working to control costs tend to drop the axe first on the workforce, said analysts.
Since its entry in September 2016, Jio has upended the market with discounted rates that have helped it net nearly 307 million subscribers by March-end. The company has a revenue market share of around 31%, according to Fitch Ratings, and it generated a net profit of Rs 840 crore in the fourth quarter of FY19. In comparison, Vodafone Idea clocked losses of Rs 4,878.3 crore. Airtel has still not disclosed Q4 numbers, but the telco’s India business is expected to post losses as well.
But Jio’s aggressive pricing stance to gain customers coupled with high capex to expand 4G network has resulted in cost pressures said experts.
The operator’s average revenue per user (ARPU), a key performance parameter, dropped for the fifth straight quarter to Rs 126.2 from Rs 130 in the previous quarter. After the demerger of its tower and fibre operations into two units, Jio’s net debt stood at Rs 67,000 crore as on March 31, 2019.―Gadgets Now