Tata Communications to hire 1,200 new staff, may raise debt

Tata Communicationswill recruit an extra 1,200 staff over the next 12 months in its outsourcing, sales and engineering divisions as it tries to turn around nearly three years of losses, the firm's CEO said on Wednesday.

The operator will also consider upping its debt if the potential returns justify it, Vinod Kumar, Tata Communications chief executive, told Reuters.

Kumar declined to comment on the prospects of Tata buying Cable & Wireless Worldwide (CWW).

Tata said in a regulatory filing on March 1 its plans for an all-cash bid for CWW were "at a very preliminary stage", adding it would decide on whether to make an offer by March 29.

Sources later told Reuters Tata was seeking USD 2 billion in term loans to finance a potential bid as well as to refinance existing debt.

Tata, 26% owned by the Indian government and part of the tea-to-technology Tata Group conglomerate, has net debt of USD 1.5 billion on core earnings of USD 350 million, giving it leverage of 4.1 times, according to Thomson Reuters data.

"It depends on the business opportunity is and what the returns can be," said Kumar, when asked if he was comfortable with Tata taking on more debt. "Our goal is reduce the debt and tailor it to the size of the business and eventually pay the debt off."

Kumar said two-thirds of Tata's new staff would be hired for its outsourcing business, which provides telecoms services for other operators, with 250 added to its sales division and a further 150 recruited to product and engineering.

The increased headcount will raise its workforce to 8,900 from 7,700 at present.

"The three areas where we are adding people are all related to revenue generation and continuing the turnaround to consolidated profitability," said Kumar.

Tata subsidiary Neotel, South Africa's second-biggest fixed-line phone operator, swung to profitability in its core earnings in the financial year, Kumar said.

"That trend will continue into the next (financial) year, but it will be a few quarters before Neotel can be profitable on its own accord," he said.

Tata is one of the world's largest submarine telecom cable owners and it plans to extend its reach to Latin America, which Kumar defined as Central and South America, adding the latter was a more important region to his firm.

"There are multiple cables which are on the drawing board and we are in discussions with them to choose the best option," said Kumar. "These cable systems will get built typically over two years so in two years we should be part of some cable that gets us to Latin America."

This likely expansion comes despite a drive to reduce costs, with capital expenditure likely to drop to between USD 250 million and USD 300 million per year, from an average of up to USD 500 million annually in recent years.

"We don't believe those levels of investment are required any more, even to keep the business growing at the same rate," added Kumar. "We have done the heavy lifting."