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Tata Communications’ Data Business Drives Strong Momentum, Backed By Robust Performance In Growth Services

Tata Communications announces its financial results for the quarter and year ended March 31st 2018.

Highlights | FY2018

  • Data business revenues grew by 4.4% YoY, on the back of strong performance in Traditional and Growth Services.
  • Traditional services witnessed steady growth of 3.9% YoY despite industry headwinds; the growth was led by ILL and Ethernet both of which grew by 14% YoY, VPN grew by 10% during the same period. This has been industry leading growth.
  • Growth services continued to witness strong momentum with a YoY growth of 35.6%. The growth rate has doubled from 18.4% in FY17. Within this portfolio IZO services grew by over 300% and Security services grew by 64% YoY.
  • The revamped Go-To-Market strategy has started to show positive results with an improvement both in funnel adds as well as in closed sales. We added 493 new customers during the year; product penetration ratio which is the number of products sold to each customer has improved from 1.75 in FY17 to 1.93 in FY18.
  • Consolidated revenues declined primarily because of lower volume and price compression in Voice and currency translation impact.
  • Consolidated EBITDA was lower due to decline in Voice EBITDA, investment into Growth & Innovation services and de-growth in Payment Solution business. Full year margins expanded by 40 Bps; aided by higher margin in TCTSL and Traditional Data services.
  • TCTSL revenues grew by 9.8% YoY, EBITDA for the year grew by 25.6% on the back of improved quality of revenue and cost efficiencies.
  • TCPSL (ATM business) broke even in Q4 on account of pick up in number of transactions and cost optimisation initiatives.
  • In FY18 there was a consolidated loss of INR 328.6 crore due to exceptional losses during the year on account of impairment of investments and other one offs.

Highlights |Q4 FY2018

  • Consolidated revenue declined by 2.6% QoQ and 6.6% YoY primarily due to decline in Voice revenue (9.5% QoQ and 26.3% YoY), this was due to both price and volume compression globally.
  • Data business revenues grew 0.4% QoQ and 4.0% YoY, on the back of strong performance in Growth Services.
  • Growth services trajectory was strong and revenues grew by 8.3% QoQ and 37.3% YoY. Cloud services, Security and Hosting solutions have witnessed very strong growth.
  • Traditional Services revenue declined by 1.8% QoQ but increased 1.1% on a YoY basis. Within this portfolio, ILL grew by 12.2% YoY and Ethernet grew by 9.4% YoY. The decline was due to impact of operator consolidation and churn.
  • QoQ Data margins were lower as margins were impacted due to upfront investment in new wins for which the revenue is expected to come in FY19 onwards.

 

Commenting on the results, Vinod Kumar, MD and CEO, Tata Communications, said: “FY18 has been a reset year for Tata Communications, as we transformed our portfolio and operating structure to make us more competitive and responsive to the evolving needs of our customers. At the same time, the success of our growth services portfolio has enabled us to move from a pure connectivity provider to a next generation digital infrastructure provider. Separately, the land demerger proceedings are headed in the right direction and will benefit shareholders who have steadfastly stood by us.”

Commenting on the results, Pratibha K. Advani, CFO, Tata Communications, said: “The momentum created by our data services portfolio is driving a shift in our performance. Data services contribute more than 87% to the overall EBITDA. The improvement in the margin profile will get more apparent as we scale up the growth and innovation services segments.

The strategy of enhancing utilisation of underlying infrastructure through collaborative partnerships globally is winning us stickier engagements with large enterprises. We are focused on cost discipline and productivity gains thus ensuring that the transformation in business profile also generates meaningful impact on the bottom-line in future.” – Communications Today Bureau

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