Tata Communications is seeing pricing pressure and even contract terminations in its core connectivity business - weighed down by macro uncertainty and global tariff challenges - that have prompted enterprise customers to tighten spending, CEO and managing director Amur Lakshminarayanan told Moneycontrol, even as it began onboarding commercial customers on AI Cloud platform, and is running proof-of-concept (POC) projects.
“We’ve noticed that uncertainty makes customers more cautious with their spending. In core connectivity, we’ve seen some pricing pressure and contract terminations due to site closures. On the other hand, our digital portfolio is seeing good traction. Funnel additions have been healthy, and Q1 deal bookings are strong compared to Q4. So, it’s a mixed bag. The macro situation, be it the Ukraine war, tariff issues, or other global conflicts, has become the new normal,” Lakshminarayanan said.
Despite near-term stress in traditional offerings, the company remains optimistic about its digital business, where it continues to see register momentum and a growing order book.
“There’s a strong technology tailwind as customers turn to digital and AI to navigate tough times. This explains our growing order book. That said, we do see pressure on pricing from existing customers, and we’re adjusting to that. We’re preparing ourselves well for this evolving world,” he added.
The company has reported multiple million-dollar deals in the June quarter, spanning its network, cloud, security, and media fabrics.
“…we won deals in Wi-Fi and LAN convergence, cloud and security services, and quite a few in the media space. So, it’s been a well-rounded quarter in terms of deal wins,” Lakshminarayanan said.
AI Cloud Platform
Tata Communications said it has begun onboarding commercial customers on its AI Cloud platform while running proof-of-concept projects with others. The company is expanding its GPU capacity under the government’s India AI Mission to cater to the growing demand for edge-based inferencing solutions.
“Yes, we’ve onboarded customers commercially, and several are running POCs. Large-scale training use cases are limited for now, but inferencing is where we expect the most activity. Our AI Cloud and Vayu Edge offerings allow us to deliver low-latency, efficient inferencing at edge locations like retail or manufacturing sites,” he said.
He added that while AI Cloud adoption is still in its early stages, the company is thinking long-term and is working on making its infrastructure more developer- and enterprise-friendly.
“Internally, we’re embedding AI into our interaction fabric, particularly in B2C scenarios, to make customer experiences more intelligent. This fabric runs on our AI Cloud, creating synergy and added value for clients,” he explained.
Onboarding for India AI Mission
On the India AI Mission, Lakshminarayanan said, “We’ve seen some onboarding, though not yet at the scale we’d like. There is interest, and we expect more traction through this channel.”
Focus on Cost Optimisation
The company is also focused on internal restructuring and cost optimisation. Tata Communications has divested its ATM business and pruned loss-making contracts in its TCTS subsidiary, helping improve its margin profile.
“As a result, we were able to divest the ATM business. In the TCTS business, we were looking to discontinue some of the onerous contracts. TCTS has now turned around in terms of that margin profile growth. All these reviews are continuing—ongoing reviews that we do to make sure that we can deliver the right margins and invest in places where we need to invest for future growth,” the MD and CEO said.
Tata Comm – Financials
The company reported a 43% year-on-year drop in net profit to Rs 190 crore in the April–June quarter, even as consolidated revenue rose 6.6% to Rs 5,960 crore. Its EBITDA margin fell by 125 basis points to 19.1% year-on-year, reflecting rising cost pressures and more cautious deal-making by clients.
The Data Services segment, which accounts for 87% of Tata Communications’ total revenue, rose 9.5% on-year to Rs 5,152 crore in the June quarter. These services include core connectivity, digital platforms and managed services. However, regional pressures remain. In the SAARC (South Asian Association for Regional Cooperation) region, client-side payment delays have affected business activity, adding to the macroeconomic headwinds.
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