TECHM sees 5G investments by telcos drive faster growth

Tech Mahindra is seeing faster growth in its communications vertical, driven by massive investments in building 5G networks by telecom clients.

Communications remains the biggest business vertical for the company, contributing over 40% of its total revenues.

Vivek Agarwal, president–BFSI, HLS and corporate development at Tech Mahindra, said this was a big capex cycle for large telecom operators as they invest in upgrading their technology to 5G.

“That’s a very big driver for market demand and hence, our business. Secondly, there is a significant trend on legacy to digitization, which is just refreshing that whole technology stack for the modern world, and the third is customer experience,” he said.

The telecom industry, he said, goes through investment cycles where there are significant investments in tech over three to five years as the industry adopts new technology.

“That’s the trend we are seeing across our client base right now. People have to adapt to it. There is no other option for all of them. It’s a question of when it will happen, and different operators will do it,” he said.

This was driving a lot of the new business for the company, with a large part of the deal pipeline or the transformation deals having this as an underlying component.

“Communications vertical continued to be its key growth driver,” Pankaj Pandey, research head at ICICI Securities, said in a report. have fixed the punctiation to make it a bit more clear -“The growth to be driven by 5G for telcos, while 5G for enterprises would take some time to pick up. 5G for business is a large opportunity of US$712 billion.”

Network deals, said Agarwal, were one large category where the company was seeing demand. “You are seeing people needing to upgrade their operations support systems (OSS) and business support systems (BSS) to be able to do new services and capabilities with 5G,” he said.

The ICICI Securities’report said that 5G constitutes 20% of Communications, Media & Entertainment (CME) business while 50% of all network services business is now 5G.

“The management indicated that 5G for communication has current run rate of ~US$500 million. The company’s CME vertical would focus on digital transformation, network and 5G services, BPS and telecom engineering services (TES),” Pandey said in the report.

Tech Mahindra is also starting to work with companies on enterprise 5G applications, an area where it has said it will see a lot of demand going forward. In 2020, it set up a 5G lab with Japan’s Rakuten in Tokyo. Business Journal