Global tariff uncertainty has made customers cautious and led to deferring closure of some deals from the January-March quarter to the current one, Tata Communications said on Wednesday.
The company, however, did not see any deal cancellations and said its order book is strong. “We are not directly impacted (tariff uncertainty). We anticipate indirect implications for us when customers take a cautious approach,” Amur Lakshminarayanan, managing director and CEO of Tata Communications, told analysts at a call to discuss the January-March quarter earnings.
Tariff worries
Tata Communications provides enterprises with network, cloud, mobility, and security services. The company’s commentary on the global tariff uncertainty triggered by the US government imposing reciprocal tariffs on countries assumes significance as 58% of its data revenue comes from international markets.
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In FY25, out of the total ₹23,109 revenue from operations, the company earned ₹19,513 crore or 84.4% of the revenue from data services, which includes core connectivity services, digital platforms and connected services.
“Our funnel continues to be healthy with a good representation of large deals. These large deals are also well diversified across India and internationally,” Lakshminarayanan said, adding that the company is cutting down on low-margin services, especially in the companies it acquired, to improve profitability.
In the last few years, Tata Communications acquired companies such as The Switch, a video production company, and Kaleyra, a messaging and communication platform. “On acquisitions, we are executing the cost synergy programmes. While Kaleyra is 18 months in and Switch is 24 months in, both are approaching the inflection point, and we expect the synergies to play out in the coming quarter,” said Kabir Ahmed Shakir, chief financial officer of Tata Communications, during the call.
In FY25, Tata Communications’ Ebitda margins contracted 100 basis points to 19.8% from 20.8% in the year-ago period. The company had earlier guided for a 23-25% margin by FY27.
“Our ambition of 23-25% margins still stays. We announced that two years ago. We have made investments very clearly due to acquisitions. It’s been a drag and those need to come back up. Second, we made investments organically to drive innovations as well, and they need to give us a return by getting the right revenue,” Shakir said.
One area Tata Communications is considering to achieve higher margins is expanding its application-to-person (A2P) SMS service to a value-added, omnichannel customer engagement solution, which it named Customer Interaction Suite (CIS). Analysts said A2P SMS is now a more commoditized, mature, and low-margin business.
According to Shakir, this suite of offerings beyond A2P SMSes would be more profitable, as AI and volume growth will help drive customer experience.
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During the year, Tata Communications divested the payments solutions subsidiary, Tata Communications Payments Solutions Ltd, to shift focus away from non-core businesses.
In the January-March quarter, Tata Communications reported a 6.1% YoY growth in revenue at ₹5,990 crore. The company’s net profit witnessed a 114.8% growth to ₹761 crore owing to exceptional gains from the divestment of the payments solutions subsidiary. The company’s Ebitda margins declined to 18.7% from 19.1% owing to some customer-specific issues, the impact of undersea cable repair costs, and marketing expenditures.
