Bangalore: IT services provider Tech Mahindra Ltd is looking to expand its businesses from companies such as AT&T Inc. and Telecom New Zealand Ltd as well as clients in the local market as India’s sixth largest software exporter tries to reduce dependence on its minority stakeholder and largest customer, British Telecom Plc., or BT.
BT, which owns a 31% stake in Tech Mahindra, currently accounts for about 62% of earnings at the Pune-based company, which provides IT services such as application development, maintenance and systems integration to the telecommunications industry. Indian conglomerate Mahindra Group owns the majority stake in the company.
Looking away: The British Telecom (BT) Tower in London is reflected in the windows of a neighbouring building
For the nine months to December, Tech Mahindra reported revenues of Rs2,614 crore, a 37% increase over the corresponding period the previous year. Profits grew 42% from the previous-year period to Rs549.2 crore.
L. Ravichandran, executive vice-president and chief operating officer at Tech Mahindra, said the company was witnessing good growth from non-BT customers such as AT&T in the US, Hutch in Indonesia and in Canada, New Zealand and Africa. “While our strategy is to grow the non-BT business that’s growing at a faster clip, we are not refusing business from BT at the same time.”
Tech Mahindra, which has started working with four operators in Canada in the last 18-24 months, expects them to mature into long-term contracts this year.
Further, the company plans to expand its Africa operations beyond the six countries it is present in now, Ravichandran said.
“The recent restructuring at BT has led to a slowdown in revenue flow (for Tech Mahindra) in the past two to three quarters,” said Harshad Deshpande, an analyst with Religare Securities Ltd. “The company’s ongoing efforts to diversify portfolio may take some time.”
Tech Mahindra’s strategy to diversify its services portfolio by adding newer offerings such as infrastructure management and business process outsourcing has enhanced the ability to bid and win larger deals in the past two years, Ravichandran said.
Also, the company has managed to convert project-based deals into multi-year outsourcing contracts with clients such as BT and AT&T by enhancing the scope of the project and assuring guaranteed savings on their current costs to customers, he said.
Tech Mahindra recently won a $350 million BT deal, which followed last year’s $1 billion deal. It expects significant downstream opportunities from the roll out of BT’s 21st Century Network project (to overhaul its communications infrastructure to provide high-speed broadband connections), he said.
Tech Mahindra is the largest among the current set of Indian vendors working with BT. The others are Infosys Technologies Ltd, Tata Consultancy Services Ltd, Wipro Technologies and HCL Technologies Ltd. Infosys earned one-tenth of its $4 billion revenue for the year to March from BT.
Ravichandran said the current slowdown in the US has not affected Tech Mahindra’s deal flow but the company was cautious about the developments.
The company sees new opportunities opening up in the Indian market where the government will release spectrum for newer operators in the coming months, he said.
Tech Mahindra has been working with the state-owned Bharat Sanchar Nigam Ltd for the interconnect billing operations in telecom circles such as Rajasthan, Punjab, New Delhi and Himachal Pradesh for the past three years.
It also operates a 1,000-people back-office for Tata Indicom, the Tata group’s telephony service.