Automation, E-KYC Help Airtel, Idea Cut Sales, Marketing and Distribution Costs: HSBC

By June 11th, 2017 AT 4:23 PM

Automation and initiatives like the Aadhaar-based e-KYC process for customer acquisition and online would help India’s top telecom operators lower sales, marketing, distribution and administration costs that would assist them to expand operating margins by around 500 basis points each over the next three years, according to a report by the Economic Times.

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Of this estimated 500 bps EBITDA margin expansion, around 150 bps is set to stem from rapid adoption of online recharges, HSBC analyst Rajiv Sharma said

In addition, the ongoing consolidation in the country’s telecom industry and automation would also lead to a sharp reduction in workforce requirements, Sharma stated in a note. He expects Bharti Airtel and Idea Cellular to go slow on additional hirings once automation and consolidation pick up.

Bharti Airtel had earlier said that e-KYC based customer addition led to substantial cost reduction for the company. It reported a near 10 per cent sequential fall in its sales & marketing expenses to Rs 1,693.4 crore in the March quarter.

Idea Cellular also reported savings in its selling & distribution expenses in the last fiscal quarter. It said that 80 percent of this saving was driven by the e-KYC process.

The implementation of the e-KYC process has resulted in a 21 percent and 11 percent quarter-on-quarter decline in Idea and Airtel’s sales, marketing and admin costs, respectively in the March quarter, according to HSBC estimates.

However, Mukesh Ambani-led Reliance Jio says that the emerging digital ecosystem will drive jobs creation. “While operators will work towards reducing costs with automation and use of digital methodologies, newer opportunities will emerge for value addition to customers leading to the creation of more jobs,” Jio spokesperson told ET.

Jio spokesperson said that the company is recruiting people in areas such as digital services, platforms, content and app development, infrastructure and cyber security, network optimisation to digital payment chains.

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