Tariff uncertainty delays transactions; Tata Communications says 23-25% margin guidance is intact
Tata Communications said Wednesday that uncertainty over global tariffs has made customers cautious and led to delays in transactions from January-March quarter to the current one.
However, the company did not see any cancellations and said its order book was strong. Amur Lakshminarayanan, managing director and CEO of Tata Communications, discussed revenues for the January quarter in a call to analysts.
Tariff worries
TATA Communications provides network, cloud, mobility and security services to enterprises. The company’s comments on the uncertainty of global tariffs caused by the U.S. government’s imposition of reciprocity tariffs on the country are of great significance, as 58% of its data revenue comes from international markets.
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In fiscal year 25, total ₹23,109 company revenue, the company earns ₹19,513 million euros or 84.4% of data services revenue, which includes core connectivity services, digital platforms and connectivity services.
“Our channels continue to stay healthy. These big deals are also full of diversity in India and internationally,” Lakshminarayanan said, adding that the company is reducing services for low-margin services, especially among the companies it acquires, to improve profitability.
Over the past few years, Tata Communications has acquired companies such as Switch, a video production company, and Kaleyra, a messaging and communications platform. “In the acquisition, we are executing a cost synergy plan. While Kaleyra was 18 months and converted to 24 months, both are close to the inflection point and we expect synergy to work in the next quarter,” said Kabir Ahmed Shakir, chief financial officer of Tata Communications.
In fiscal 25, Tata Communications’ EBITDA margin signed at 100 basis points to 19.8% from 20.8% in the same period last year. The company earlier directed 23-25% profits before fiscal 27.
“Our ambitions still have a profit margin of 23-25%. We announced two years ago. We made the investment clearly due to the acquisition. It was a barrier and needed to back up. Second, we also invested organically to drive innovation and they need to pay us back by getting the right revenue,” Shakir said.
One area of TATA Communications is considering achieving higher profit margins is expanding its counterpart application (A2P) SMS services to value-added, omnichannel customer engagement solutions and named it Customer Interaction Suite (CIS). A2P SMS is now a more commoditized, mature and low-profit business, analysts say.
Shakir believes that product suites outside of A2P SMSE will be more profitable, as AI and batch growth will help drive customer experience.
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During the year, Tata Communications divested payment solutions subsidiary Tata Communications Payments Solutions Ltd to shift focus from non-core businesses.
Tata Communications reported revenue growth of 6.1% in the January-March quarter. ₹59.9 million. The company’s net profit witnessed a 114.8% increase ₹$76.1 billion was $76.1 billion due to the divestiture of payment solutions subsidiary. The company’s EBITDA margin fell from 19.1% to 18.7%, due to certain customer-specific issues, cost of submarine wired repairs and marketing expenses.
