Saturday, July 2, 2011

Tech Mahindra

Software company Tech Mahindra Ltd. is set to sign a large contract to provide call center services to a top mobile phone operator in India in a deal that is likely to push the pace of revenue growth at its business process outsourcing division beyond last fiscal year's 26%.
A large deal for the company is usually in the range of $15 million to $150 million for three years, Sujit Bakshi, president, corporate affairs and BPO, said in a recent interview. Based on the volume committed by the telecom service provider currently, the deal is likely to earn revenue of more than $15 million in three years.
"We have tied up with them, but the [signing of a] master services agreement takes time," Mr. Bakshi said, adding that the company will sign the agreement in a month's time.
Tech Mahindra's BPO division offers voice- and non-voice-based back office services to telecom companies, in line with its parent, which also focuses on providing software outsourcing services to the sector.
The BPO division's clients include top telecom operators in India Bharti Airtel Ltd., Idea Cellular Ltd. and Reliance Communications Ltd.
Mr. Bakshi, however, declined to name the latest client, but said the company had signed a similar deal in the just-ended quarter with the same company in another market. In February, Tech Mahindra signed a contract with Vodafone Group PLC's unit in Qatar to offer technical solutions to the telecom company's customers.
Mr. Bakshi also said the estimated value of the deal is vulnerable to volatility in the mobile phone market in India, which recently let users change service providers without changing their phone numbers. "Especially with this churn [in India's telecom sector] from number portability, nobody will give a firm forecast for one year," he said.
Pune-based Tech Mahindra's note of optimism on its BPO business comes as growth in the sector lags the country's high-profile IT services industry, weighed down by the global economic slowdown, declining billing rates offered by clients and higher staff costs.
The financial performance of the company's main IT services division has also been patchy in recent years due to its overdependence on the telecommunications sector. Telecom service providers the world over have been hit by a drop in consumer spending after the global financial crisis.
Research firm Gartner Inc. expects the worldwide BPO market to grow at an average annual rate of 5% to $208 billion in 2014 from $172 billion in 2010.
The latest deal is also based on a pricing model in which Tech Mahindra can earn a margin over each call on the client's network through efficient utilization of staff, Mr. Bakshi said.
Mr. Bakshi expects the latest deal, along with the large contract it received from Bharti Airtel in Africa last year and a multi-million dollar partnership with a telecom client in the Philippines signed earlier this year, to spur revenue growth in the division in this fiscal year.
In the last fiscal year ended March 31, Tech Mahindra's BPO division reported $70.5 million in revenue. The BPO division accounted for nearly 7% of the company's $1.13 billion total revenue. Revenue from Airtel in the last fiscal year was less than $1 million, Mr. Bakshi said.
He also expects the additional business it recently won from an existing client in the U.S. and the U.K. to power revenue growth this fiscal year.
Mr. Bakshi said the division is currently chasing a number contracts from most of the service providers in the developing African telecom market. Tech Mahindra recently opened an office in Nigeria, which will be the headquarters for its BPO business in the continent.

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