Home >Companies >Company Results >Tata Communications Q3 profit up four-fold driven by profitability in data biz

Tata Communications Ltd on Tuesday reported a 428.2% year-on-year (y-o-y) surge in consolidated profit after tax to 309 crore in the December quarter driven by robust growth in profitability and revenue from data business.

At 4,223 crore, the telecom operator’s gross revenue during the quarter was unchanged from a year ago as growth in data business offset the decline in that of voice. Its data business recorded “stable growth despite a seasonally slow quarter", the telco said in a statement.

The telco’s data revenue grew 3.8% from a year ago due to strong performance of traditional services, Tata Communications said. Traditional services clocked a revenue growth of 6% y-o-y, while its earnings before interest, tax, depreciation and amortisation (Ebitda) rose 20.7% and margin was up 42.9% during October-December.

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The company posted a consolidated operating profit or Ebitda of 1,046 crore during the quarter, up 37.5% from the same period last financial year, on the back of margin expansion in data business and cost optimisation initiatives. Ebitda margin, which was at 24.8%, increased 680 basis points (bps) y-o-y, while it fell 150 bps sequentially.

Data business contributes 98% to overall Ebitda of Tata Communications.

The covid-19 pandemic has driven data consumption as millions continue to log in from their homes for work, education, entertainment, and other services. All telecom operators saw data usage ballooning during the initial months of the pandemic.

“We are witnessing strong demand from OTT (over-the-top) and enterprise segments for our services," the telco said. In the June quarter results, the Tata group-company had said, “Enterprises have upgraded their capacities and are consuming more data to support this work model. Consequently, our India enterprise business grew 6.7% y-o-y and international enterprise business grew 8.3% y-o-y on the back of strong demand".

The company’s investment in digital segments has helped deliver “good results" in a seasonally-weak quarter, said AS Lakshminarayana, managing director and chief executive officer (MD & CEO), Tata Communications.

“Our Secure Connected Digital Experience (SCDx) offering continues to be relevant as we reimagine the new world for our customers. At the same time, our investments in products and services are positioning us well in our customers’ digital transformation journeys, an example being our investment in Oasis," he said.

The company’s net debt has fallen due to strong free cash flow generation. Tata Communications’ net debt to Ebitda is now 1.9 times versus 2.9 times in Q3 FY20. However, its capital expenditure declined to 339 crore in the December quarter from 490 crore a year ago.

“We continue to deliver on our goal of profitable growth. Both profitability and cash flow generation has improved significantly in the last few quarters on the back of cost efficiencies and improved business processes," said Kabir Ahmed Shakir, chief financial officer, Tata Communications.

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