Suspension of mobile, equipment manufacturing to hit Indian telecom sector: KPMG

Suspension of mobile and network equipment manufacturing is expected to have a significant impact on Indian telecom sector due to Covid-19 pandemic, according to a KPMG report released on Monday.

KPMG said that the deadline to discuss the adjusted gross revenue issues should be postponed for at least a quarter for supporting the telecom sector in the long-run.

The pandemic is also going to impact the proposed auction for 5G services in the country.

According to the report, there will be a high impact on price of materials, equipment, bandwidth availability, cash flow and network availability due to the crisis created by Covid-19.

"From handset and network equipment manufacturing perspective, the global disruption in supply chains and suspension of manufacturing facilities will significantly impact the telecom sector in India," the KPMG report on Impact of Covid-19 on the Indian economy said.

It said the telecom services companies are expected to provide uninterrupted services.

"Covid-19 is also likely to impact the much awaited 5G auctions as operators are focusing on servicing current demand surge and quality of service," the report said.

The demand for handsets and new subscriptions are likely to be impacted in the short-term.

According to the mobile industry body ICEA, the manufacturers in the segment may face loss of Rs 15,000 crore due to the suspension of production in the factories during the lockdown. This adds to the burden of six per cent GST on the mobile phones which may lead to job losses.

KPMG report suggested that there should be relaxation on quality of service norms in the short-term, and financial aid for network expansion. The report recommended ease of taxes and levies on the sector for its viability.