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KOLKATA: Aircel, the Indian arm of Malaysia's leading telecoms operator Maxis Berhad, will cut some 600 jobs or 12% of its workforce following its decision to reduce operations in five unprofitable regions amid surging costs and severe margin pressure, executives aware of the development told ET.
Aircel, which has about 66 million customers and a pan-India 2G presence, will scale down operations in MP, Punjab, Haryana, Rajasthan and Gujarat in its bid to cut costs and reallocate resources to profitable zones. The company has about 800 employees and 6 million customers in these five circles.
The country's fifth largest mobile carrier, in which Maxis owns 74%, will test the waters in MP where it proposes to rely on its intra-circle roaming pact with Tata DoCoMo for coverage, and handle customer acquisitions and recharges online, dispensing with the need of having its own network and sales & distribution channels at the field level.
"If the MP pilot is successful, the new business model will be extended to other unprofitable regions," said a company executive with direct knowledge of the development.
Aircel, in its response to ET's specific queries, said it is changing its business model to reduce costs. "Operational costs are high and margin pressure is severe. Aircel is revamping its business model to lower the 'cost to serve' without compromising on customer service and network experience," said a company spokeswoman, declining, however, to confirm whether impacted staff in the scaled down circles would be relocated to profitable zones.
But executives privy to the developments said the new business model of relying on intra-circle roaming pacts to provide coverage to 6 million customers could have serious limitations. "Coverage can be a challenge as the intra-circle roaming pacts in the five regions are not all-encompassing,"" said one of them, adding there could also be problems in targeting customer acquisitions and recharges online if Aircel dispenses with ground level sales and distribution channels.
Aircel's move resembles what Norway's Telenor's did when its Indian unit reduced operations in four out of the 13 regions where it operates mobile services to refocus resources in profitable zones.
India was one of the world's fastest growing mobile markets but the sector has lost its sheen over the past three years, largely weighed down by fierce price wars, policy and regulatory uncertainty. Weighed down by debt, mobile phone companies have also been unable to expand footprint on the 3G front and many have pulled back freebies amid declining subscriber growth.
Months after the 3G airwaves auction, India's largest scam led to the sacking of A Raja, the ex-telecoms minister under whom airwaves were contentiously allocated for voice and 2G services. The sector has suffered a jolt in absence of follow-up action and resolution of regulatory uncer-tainty, thwarting additional investments in network rollouts that has also hit gear makers' revenues. The 2G scam has also discouraged investors and scuppered business plans of many telcos.
Aircel to cut 600 jobs amid surging costs, severe margin pressure - Economic Times
Aircel, which has about 66 million customers and a pan-India 2G presence, will scale down operations in MP, Punjab, Haryana, Rajasthan and Gujarat in its bid to cut costs and reallocate resources to profitable zones. The company has about 800 employees and 6 million customers in these five circles.
The country's fifth largest mobile carrier, in which Maxis owns 74%, will test the waters in MP where it proposes to rely on its intra-circle roaming pact with Tata DoCoMo for coverage, and handle customer acquisitions and recharges online, dispensing with the need of having its own network and sales & distribution channels at the field level.
"If the MP pilot is successful, the new business model will be extended to other unprofitable regions," said a company executive with direct knowledge of the development.
Aircel, in its response to ET's specific queries, said it is changing its business model to reduce costs. "Operational costs are high and margin pressure is severe. Aircel is revamping its business model to lower the 'cost to serve' without compromising on customer service and network experience," said a company spokeswoman, declining, however, to confirm whether impacted staff in the scaled down circles would be relocated to profitable zones.
But executives privy to the developments said the new business model of relying on intra-circle roaming pacts to provide coverage to 6 million customers could have serious limitations. "Coverage can be a challenge as the intra-circle roaming pacts in the five regions are not all-encompassing,"" said one of them, adding there could also be problems in targeting customer acquisitions and recharges online if Aircel dispenses with ground level sales and distribution channels.
Aircel's move resembles what Norway's Telenor's did when its Indian unit reduced operations in four out of the 13 regions where it operates mobile services to refocus resources in profitable zones.
India was one of the world's fastest growing mobile markets but the sector has lost its sheen over the past three years, largely weighed down by fierce price wars, policy and regulatory uncertainty. Weighed down by debt, mobile phone companies have also been unable to expand footprint on the 3G front and many have pulled back freebies amid declining subscriber growth.
Months after the 3G airwaves auction, India's largest scam led to the sacking of A Raja, the ex-telecoms minister under whom airwaves were contentiously allocated for voice and 2G services. The sector has suffered a jolt in absence of follow-up action and resolution of regulatory uncer-tainty, thwarting additional investments in network rollouts that has also hit gear makers' revenues. The 2G scam has also discouraged investors and scuppered business plans of many telcos.
Aircel to cut 600 jobs amid surging costs, severe margin pressure - Economic Times