IT cos see telecom sector earnings plunge
Cross-currency impact, flat growth in customer accounts.
Shamik Paul
Bangalore, Jan. 25 Besides cross-currency impact, flattish growth in key
customer accounts has pulled down the telecom sector earnings as a percentage
of total revenue for large Indian IT services companies such as Infosys and TCS.
For the latest quarter, telecom contributed 16.7 per cent of Infosys's total
revenue, down from 21.1 per cent in the year-ago period. Analysts attributed
this decline partly to the sluggish growth in the BT account, which is
Infosys's top client, contributing 6.2 per cent of its total revenue.
"If you see in constant currency terms, the BT account was almost flat," said
Mr V. Balakrishnan, Chief Financial officer, Infosys. The decline in the sector
was mainly because of the cross-currency volatility, he added.
Mr Gaurav Dua, an analyst with Sharekhan Research, said there is no growth in
the BT account for Infosys. "It is not that the account is going down, but it
is growing at a much slower rate as compared to the overall growth for the
company," he added.
The impact on Tata Consultancy Services would be less severe as the company's
exposure to BT is lower, Mr Dua said.
Sources said BT might manage certain jobs internally, which would have a dent
on outsourcing.
Another factor that could lead to work drying up was that the company might not
need certain services from the IT vendors, as its customers would not need
those services.
An analyst, on condition of anonymity, said BT's decision to cut 10,000 jobs by
March 2009 in order to reduce costs includes headcount rationalisation with
certain IT service providers such as Infosys.
BT had earlier said the job cuts would mainly affect agency and contract staff,
including offshore workers.
"We do not speak about customer-specific issue," said Mr Balakrishnan, on being
asked if there has been any headcount rationalisation on the BT account in
Infosys. TCS said it has not seen any headcount rationalisation on the BT
account.
When asked if TCS has seen slower growth from one of the large UK-based telecom
services provider that announced 10,000 cuts in November 2008, Mr Ravi
Vishwanathan, Vice-President and Head (Telecom Practice), TCS said he would
tend to agree with the statement.
"But it is not only with that particular operator that we have seen a
slowdown." TCS has mainly seen slowdown from clients in mature markets such as
Europe, UK and North America, Mr Vishwanathan added. TCS earns about 58 per
cent of its telecom revenue from the service providers, while the remaining
comes from the equipment makers.
http://www.thehindubusinessline.com/2009/01/26/stories/2009012651110300.htm
ekamber
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