Tech Mahindra's $500m-plus Telefónica deal, one of its biggest ever deal wins
Tech Mahindra has won a $500 million-plus, five-year deal from Telefónica O2—its biggest-ever contract in Europe—bolstering CEO Mohit Joshi’s turnaround push as telecom growth revives.
Tech Mahindra Ltd has bagged one its largest deals ever, a five-year contract worth more than $500 million from Spanish telecom major Telefónica O2. The deal strengthens chief executive Mohit Joshi’s efforts to revive growth at the country’s fifth-largest IT services firm.
Under the agreement, Tech Mahindra will modernize Telefónica O2’s IT infrastructure. The deal is expected to ramp up in the second half of fiscal 2027.
The Pune-based IT company announced the deal during its post-earnings press conference on 16 January but had not named the client. The management had then said it was one of its largest deal wins and its biggest ever in Europe.
The company’s earlier largest deal was a $700 million contract from BT plc, formerly called British Telecom, in July 2008.
For Tech Mahindra, which reported a revenue decline last fiscal and has struggled with growth in its core telecom business, the deal offers rare revenue visibility and momentum at a time when large IT contracts are increasingly scarce.
India's topIT service providers are increasingly winning big ticket deals. Infosys bagged a $1.6 billion deal with the National Health Service on 14 October.
A month earlier on 2 September, Tata Consultancy Services Ltd, #1 in the industry by revenues, reported a $640 million IT modernization contract from Scandinavian insurer Tryg.
Fourth-largest Wipro Ltd was not far behind either. In March this year, it won a 10-year contract with UK-based insurance company Phoenix Group, valued at $650 million.
Nasdaq-listed Cognizant Technology Solutions Corp also announced that it bagged two mega deals in the April-June 2025 period. One was with a large healthcare company and the other was with a telecom firm. Cognizant is an Indian-heritage IT firm, as about three-fourths of its headcount is based in India.
Revenue impact
The five-year contract translates into average annual revenue of around $100 million, or roughly 1.6% in incremental revenue. Tech Mahindra ended last fiscal year with $6.26 billion in revenue, down 0.21% year-on-year.
“The revenue we have called out is all net new. While this is an existing customer, the number that we have included in our large deal wins is only the new new component," CEO Joshi had said on the 16 January call.
The win comes as a shot in the arm for Joshi, who took over as chief executive in December 2023 and has since outlined a three-year turnaround roadmap. Under Project Fortius, unveiled in April 2024, Tech Mahindra aims to grow faster than the peer average and lift operating margins to 15% by FY27.
According to two people aware of the matter, Tech Mahindra beat Japanese IT outsourcer NTT Data to secure the contract. While the company does not disclose the number of $100-million-plus clients, its financials show it has 28 customers generating more than $50 million annually.
Telecom rebound
Analysts had welcomed the deal, noting its importance for Tech Mahindra’s telecom vertical, which contributes over a third of the company’s revenue.
“The telecom vertical saw YoY growth of 4.6% in USD terms, a break from the decline seen in nine of the last 10 quarters. Sustaining this growth is crucial, as telecom has been a key drag on growth for TechM," said Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat, and Tushar Dhonde in a note.
Historically, many of Tech Mahindra’s largest deals have come from telecom clients. The company last secured a $500 million contract from Etisalat-owned Swan Telecom in 2009 and won an IT outsourcing deal from Telefónica Germany in 2021 for an undisclosed sum.
Queries sent to Tech Mahindra seeking clarification went unanswered.
Telefónica context
Telefónica is a Madrid-based telecom operator that runs Virgin Media O2 in the UK. It ended calendar 2024 with revenues of €41.3 billion ($48 billion), up 1.6% year-on-year.
This also marks Telefónica’s second large IT outsourcing deal with an Indian IT major in recent months. As reported by Mint on 17 December, Telefónica’s UK arm awarded a $1 billion, 10-year IT outsourcing contract to Tata Consultancy Services Ltd.
Mint could not independently ascertain the differences between the two contracts, but one of the two persons familiar with the matter said Telefónica split one large deal into two. This comes as an outlier as large companies are reducing the number of IT vendors they work with.
Virgin Media declined to comment.
At least one analyst said the Telefónica deals were split to keep the two companies distant.
"It is not unusual for firms to split contracts for a variety of reasons. They want to preserve competition in their vendor mix as well as take advantage of different strengths," said Peter Bendor-Samuel, founder of Everest Group.
Joshi said earlier that the overall demand environment remains broadly unchanged but sounded cautiously optimistic.
“The demand environment has certainly strengthened a bit. I won't say that there's a dramatic change or that, you know, we're off the races, but it certainly reflects that the environment is slightly more stable," Joshi said at the 16 January press conference.
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