5G troubles to hurt Wipro's technology business show in medium term

Lack of uptake for 5G equipment by communication service providers and pause in investments in the space will impact the technology business unit growth in the medium term, said Abidali Neemuchwala, CEO, Wipro.

Explaining this in detail, he said some of the tech companies that are part of the technology business unit are 5G equipment manufacturers. These firms have seen a pause in investments in 5G space.

“However, I don’t think this is a long term trend and investments should come back,” he said.

For the quarter ended December 2019, the technology vertical, accounting for about 12.3 percent of the overall revenue, declined 3.7 percent sequentially. The company registered a consolidated revenue of $2,094.8 million for the third quarter.

5G has been a cause of concern for communication service providers following a ban on Huawei in the US and a delay in the rollout of 5G in some regions including India.

For instance, Verizon has delayed its 5G rollout due to the need for new equipment. The US is pressuring the nations it had diplomatic ties with to refrain from using Huawei 5G gear due to the firm’s closeness with the Chinese government. Though India has given a go-ahead for 5G trials, details are yet to be ironed out including spectrum allocation.

Apart from 5G, other factors for muted growth in the technology vertical are the furloughs and slowdown in spending in the semiconductor industry. “Furloughs is the biggest in this quarter. At a lot of technology companies, there is a complete shutdown for maintenance. This apart, we are also seeing softness in the semiconductor sector,” he added.

India’s telecom crisis is not helping the scenario either, Neemuchwala pointed out, adding that India accounts for a significant portion of communication vertical. “Globally the vertical is doing moderately well,” he said.

Jatin Dalal, CFO, Wipro, said, “In telecom, it is hard to see how the sector performs from one quarter to the next as a lot rides on technology. The Indian telecom industry is going through its own crisis and we are adjusting to the new normal."

Communication vertical growth for the company remained stagnant over the last couple of quarters and stood at 5.7 percent of overall revenue.