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Tata Communications: Mitigating debt through the sale of assets

July 14, 2016

Tata Communications, the global telecom arm of the Tata Group, has been taking several initiatives to infuse new life into its telecom business. On the operational front, the company has modernised its service offerings and ventured into new verticals such as enterprise and data centre services in order to compensate for the slowdown in its traditional voice service business. Meanwhile, on the financial front, it is making concerted efforts to pare its debt through asset sales.

A look at the company’s operational and financial highlights, the recent initiatives taken by the company and the future outlook…

Operational and financial performance

A segment-wise analysis of the company’s performance during the quarter ended March 2016 reveals that the data and managed services segment was the biggest contributor to overall revenues (53 per cent) while the voice segment’s share was around 38 per cent. The South Africa operations, being carried out by the company’s subsidiary, Neotel, accounted for 7 per cent of revenues and the rest was contributed by the payment solutions segment, including end-to-end ATM deployment and hosted core banking.

On the financial front, Tata Communications reported a 15.17 per cent increase in its consolidated net loss from Rs 1.78 billion during the quarter ended March 2015 to Rs 2.05 billion during the corresponding quarter in 2016. According to the company, this was on account of impairment of equity in its subsidiary, Tata Teleservices Limited (TTSL). Meanwhile, the company’s income from operations increased by 6.8 per cent from Rs 48.15 billion to Rs 51.45 billion during the same period. The total expenditure of the company also rose by around 6 per cent from Rs 46.55 billion to Rs 49.34 billion. As of March 2016, Tata Communications’ net debt for the core business comprising voice solutions and data services stood at $1,438 million.

Debt management strategy

Tata Communications has been trying to manage its piling debt for some time. It has been looking to offload a majority stake in Neotel, a South Africa-based fixed line telecommunications service provider. To this end, it has been in talks with Vodacom since May 2014. The transaction, which was likely to fetch SAR 7 billion for Tata, has, however, now lapsed due to regulatory complexities and non-fulfillment of certain conditions. Tata Communications is now looking for other buyers for the unit. The net debt of the company on account of Neotel’s operations stood at ZAR 4,468 million as of March 2016.

A silver lining has come in the form of a deal that it concluded with Singapore Technologies (ST) Telemedia in May 2016. As per the definitive agreement signed between the two companies, Tata Communications will hive off 74 per cent stake in its data centre business in India and Singapore to ST Telemedia Global Data Centres, a wholly owned subsidiary of ST Telemedia, for approximately $630 million. The business includes 14 data centres in key cities in India and three in Singapore. On completion of the sale, Tata Communications will continue to hold 26 per cent share in the business.

Focus on Southeast Asia

The Southeast Asian region has emerged as a key focus area for the company as it looks to expand its global operations. In March 2015, it partnered with Indonesia-based operator Indosat to provide a comprehensive portfolio of services including global networks, value-added services, unified communications and security services, as well as several industry-specific solutions for Indonesian enterprises. Singapore has become an important hub in the company’s scheme of operations. Its Singapore entity is the holding company for all its international businesses and accounts for roughly 75 per cent of the total turnover. “With our international business growing rapidly, Singapore will continue to play an important role for the business,” says Vinod Kumar, managing director and chief executive officer, Tata Communications. “We have some key product functions in Singapore and they are among the fastest-growing components of our portfolio. The head of the mobility and collaboration-enablement business is based in Singapore and we will definitely leverage the country as a base to create and grow our mobility services portfolio. The growth of our collaboration and mobility services will make Singapore one of our most prominent locations for service creation.”

Going forward, the company plans to expand its operations to other Southeast Asian markets, including the Philippines and Malaysia.

New service offerings

The company has recently launched a simple and scalable storage service portfolio, IZO Cloud Storage, which offers businesses unlimited storage capacity in Tata Communications’ owned and associated data centres in India, Singapore, Hong Kong and the UK, and also enables end-to-end data management of the company’s global network. The platform aims to support enterprises in hybrid cloud adoption by combining network connectivity, cloud storage and data security. “As data volumes continue to skyrocket while data retention and sovereignty regulations across industries tighten, companies today face three major challenges: cost, complexity and security. IZO Cloud Storage tackles each of these challenges in a simple yet ingenious way,” said Genius Wong, president, Global Network, Cloud and Data Centre Services at Tata Communications, in an official press release.

Tata Communications has also entered into an agreement with global mobile connectivity specialist iPass, under which Tata will harness the latter’s global Wi-Fi access and related features and functions through the SmartConnect Software Development Kit. The partnership will enable Tata Communications to supply its mobile network operator and application service provider customers with a secure means of accessing the iPass Wi-Fi network, which includes more than 53 million hotspots in over 120 countries. iPass and the Tata Group have a long-standing partnership, under which Tata provides iPass access to its Wi-Fi hotspots in India.

In February 2016, it had launched Data Roaming Boost, a global service that enables mobile network operators and service providers to deliver a significantly improved mobile internet experience for their customers, with the potential to halve the time it takes to open a webpage or application on their smart device while they are travelling overseas. With this service, mobile network operators can connect their customers to the internet using the closest Tata Communications’ globally deployed point of presence. This ensures a high quality browsing experience for roamers while giving service providers full control of their subscriber traffic.

Going forward, Tata Communications plans to roll out India’s first internet-of-things (IoT) network and low power wide area network (LPWAN) based on LoRa technology. LoRa is a wireless communication technology dedicated to the IoT and machine-to-machine communications network. It is a super low-power and secure communications solution that helps in overcoming the high power consumption challenges of existing wireless solutions. Besides, the LPWAN wireless network has unprecedented reach, enabling communications in deep water and up to 50 metres underground. This makes it suitable for use inside buildings. Moreover, compared with 4G, Wi-Fi, or Bluetooth solutions, the LPWAN network is more cost-effective for deployment by organisations. The company has successfully conducted network trials across Mumbai and Delhi and plans to cover 400 million people across the country in the first phase.


The telecom industry is undergoing a significant shift globally, with enterprises emerging as key customers for service providers.  Further, with the growing convergence between telecom and information communication technology, there needs to be innovation, competition and investment in telecom networks as well as in services, content, applications and operating systems. Given Tata Communications’ well-diversified portfolio and the steps taken by it to innovate its offerings, the company is well positioned to leverage the opportunities emerging from these changing dynamics.

Over the next few years, Tata Communications intends to shift its focus from its data centre business towards the development and introduction of its advanced managed services portfolio (including IP, cloud enablement and unified communications services), as well as invest in its strategic partnerships across the world


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