Now days, the most common word in the market is recession and people are curious about recession’s relation with telecom industry’s growth, which is still unaffected, when compared to other industries. Let us review the market dynamics and to conclude recession’s impact on telecom growth.
- Reduction in purchasing power
- Need and demand shift
Reduction in purchasing power
The impact of this phenomenon can affect the mobile operators when people with stop using mobile phones due to shorter funds and hence low ARPU’s and ultimately low revenues, which later on may lead to cost cutting and lay-offs by the companies.
But in Pakistan, especially so far, case is different in a sense, that users are still actively using mobile phones and the most appropriate word for this would be “Addicted” to mobile phone usage that it has not been reduced in that significant manner, or in a manner which could compel mobile operators to initiate any precautionary measures.
Need and Demand shift
This is again very important element for any economy and no doubt it can affect the mobile operators too. Pakistani Handset market is experiencing some decline, as handset market is not having serious customers because need and demand shift has been shifted to more niche needs of society. People of Pakistan (majority of them) are avoiding using expensive phones, especially when very basic needs are yet to be achieved.
Currently, this handset market’s need and demand shift is not impacting cellular companies, but if this continues, cellular companies will have to shift their resources or revamp them.
Well, the most important factor in any recession is layoffs. The increase in un-employment rate, getting fired for no reason and then having very low opportunity in the market for next job; can be worst nightmare of anyone. This element is root cause of above elements as well. So far, we have not seen any layoffs but only some rumors of different mobile operators that they are firing their resources.
As per analysts, we will not observe any layoffs until unless users are providing constant revenues to the mobile operators. Instead we can expect more opportunities in the market from mobile operators in the context of expanding their services, like 789 has already created lot employments for the market. Yes, this could be possibility that mobile operators will stop hiring’s for certain period of time but will not use lay-off as tactic to handle recession.