Tata Communications going big on GPU investment; want a clear private 5G policy, says CEO

A more suitable metric for our business to track currently is EBITDA. On that front, quarter-on-quarter we’ve improved; year-on-year, there’s a marginal decline of about 40–50 basis points — a small enough decline that it’s hard to pinpoint specific reasons between Q2 last year and Q2 this year. Directionally, we’ve stated that when the business was operating at 24–25 percent EBITDA, we would make investments, which brought it down to 18 percent. We are now around 19 percent. Our target is to take it to 23 percent as a first milestone. So directionally, we’re on the right trajectory.

Quarter-to-quarter movements are hard to explain — for example, some cable cuts or lower-than-expected core connectivity revenues (which deliver better margins) can affect it. But that’s not how we look at the business; we view it long term. From a long-term perspective, we went from 24 percent to 18 percent due to organic and inorganic investments, and now at around 19 percent, we aim to reach 23 percent in the next couple of years.

As for the PAT line, that’s where there’s a lot more movement. We get other income from tax refunds or sometimes from property sales where we book profits. So PAT tends to fluctuate more and doesn’t directly reflect the underlying business performance.

In previous quarter, you talked about market uncertainty, pricing pressure and some contract terminations. Have things improved on that front?

Businesses are still cautious, but we do see some macro improvement. How that translates into corporate spending will take a quarter or two to assess.

For instance, the speed of deal closures has improved marginally — our internal metrics show opportunities staying a little less time in the funnel before closing. That said, these movements are small and can be hard to interpret. I’d wait before making any strong statements. Macro uncertainties have been around for two to three years now — whether it’s the Russia–Ukraine war, trade tensions, or the Israel conflict and if this is not what Pakistan and Afghanistan conflict would do. These disruptions keep coming. So, these uncertainties will continue.

So, we’ve decided to treat uncertainty as the new normal and continue driving the business forward. From that perspective, the improvements we’re seeing are encouraging.

What’s been the impact of recent cable cuts?

It’s hard to quantify and we don’t share specific numbers since we negotiate with shipping owners and consortium partners who also share costs. Cables are owned by consortium partners.

Suffice it to say, cable cuts are a nuisance — we lost some revenues this quarter because of them and they also add to costs. Repairing submarine cables can take up to six months, depending on where they’re cut. While we’ve always managed such disruptions, in the last two years they’ve become much more frequent, which is something new for our business. So, that’s a new norm that we as a business have never seen before.

The company announced several wins, including government projects and the BSNL eSIM initiative. Could you elaborate?

Yes, we’ve had healthy deal wins across our product portfolio — in networks, cloud and security and the interaction fabric.

One key project was the GST tribunals digitalisation initiative, which we’re very proud of. It showcases our full capabilities — our network fabric, cloud and security fabric, interaction fabric and our unique digital fabric tool that integrates across domains.

The BSNL win is for remote provisioning of eSIMs. These are both important and strategic wins for us.

Any major deals on the card?

I can’t name specific deals until customers make their announcements but our pipeline is strong. We’re participating in and winning an increasing number of such large deals.

In the past, you have spoken about reviewing businesses for divestment or restructuring. Any progress?

Yes, we initiated a strategic value review some time ago. The first business we divested was the ATM payment solutions, which we exited successfully. The second was TCTS, which had been loss-making. The third was NetFoundry, which was in its early stages and required heavy investments. We felt it was better placed in someone else’s hands for further growth.

We eliminated many unprofitable contracts, so revenues dropped temporarily but the business is now healthy, profitable, and expanding internationally.

We continue to review our portfolio and are not afraid of investing in new areas like cloud, software products, and cloud connectivity. This is a learning cycle — knowing when to invest, how much, and when to exit.

One thing is clear: in digital businesses, we can’t operate with the old, steady mindset. It’s dynamic, and that’s the DNA we’re building in the company.

What’s the update on the AI cloud platform? Last time, you said you had begun onboarding customers and running POCs.

We’re making good progress. Many PoCs have now converted into commercial contracts, with strong order bookings last quarter, and we expect even higher bookings this quarter. We’ve also expanded our GPU cloud capacity and are working on how to have best performing GPUs at the right price points. We are offering enterprises full AI studio capabilities to help them develop and deploy AI at scale. Most customers are still in experimentation mode, and as a country, India is in the early stages of AI adoption but the future looks very exciting.

Have you completed GPU sourcing for existing demand, or is it ongoing?

It’s an ongoing process. We’ve completed a second tranche of investments, expanding our GPU infrastructure footprint. As demand grows, we’ll expand further in phases.

Any update on private 5G discussions with the Department of Telecom?

We’re in continuous discussions. We need to encourage enterprises to invest in the ecosystem. Our view remains that private 5G networks should be distinct from public networks. Public 5G still has issues — even basic calls or data drops, as we all experience. Now imagine factory operations depending on that same network — it’s risky.

So we believe private 5G spectrum must be allocated separately. Even when it is, enterprises will still go through an experimentation phase with use cases to test RoI and use cases, meaning adoption will take time. Every delay only pushes India further behind in building smart factories but we’ll be patient.

Telcos argue that with network slicing, they can dedicate parts of their network to enterprises for reliable connectivity. How do you respond?

That’s a valid argument but more theoretical than practical at this stage.

Are you in talks with enterprises that could be your potential private 5G customers?

Yes, we’re constantly talking to enterprises. Interestingly, around 80 percent of IoT use cases in factories can be deployed without private 5G — using technologies like LoRaWAN or Wi-Fi 6.

We’ve implemented worker safety solutions at massive scale using these technologies. Enterprises need to first build a data platform, learn from it, and then explore how private 5G can add value.

So, the lack of private 5G isn’t the only bottleneck — it’s part of a broader maturity journey, similar to AI. Just because you have larger amounts of GPUs suddenly, not every enterprise is going to become an intelligent enterprise. The same thing applies to IoT and private 5G. The ecosystem — policy, investment, enterprise readiness — all need to evolve together.

What market trends or demand patterns are you seeing?

Our funnel remains healthy and most of it is in our digital portfolio. The Next-Gen Connectivity business has grown 30 percent, and we’re expanding internationally. Demand is broad-based across segments. We’re also seeing rising interest in generative AI, particularly in customer experience, care, and contact center automation.