Infosys on Tuesday said that it has bagged a €€1.5 billion ($1.64 billion) deal from Liberty Global to build and scale the entertainment and connectivity platforms of the digital communications firm. The agreement has an initial tenure of five years which can be extended to eight years, which would take the deal value to €€2.3 billion ($2.5 billion), the company said.
This is third big agreement, which Infosys has clinched this year and comes at a time when the company has cut its revenue guidance for the current fiscal amidst tough macro economic conditions. The development also highlights the growing focus of IT firms on the telecom business.
Infosys’ deal follows, HCLTech, which last week a bagged a $2.1- billion contract from Verizon. In fact, on Tuesday, HCLTech also announced that it has been selected by Cricket Australia (CA), the national governing body for the game in Australia, for the next phase of CA’s digital transformation. Analysts say that even this deal will fall in the telecommunications, media, publishing and entertainment vertical of HCLTech.
The collaboration with Infosys allows Liberty Global to realise run-rate savings in excess of €100 million per annum, inclusive of other savings and technology investments, according to the filings made by the IT firm. As part of this deal, more than 400 Liberty Global employees will transition to Infosys.
Salil Parekh, CEO and MD, Infosys, said, “We are excited to bring Infosys Topaz™ to enable transformative AI-first capabilities to complement the cloud-first digital foundation we have laid for Liberty Global using Infosys Cobalt”.
Three months back, Tata Consultancy Services (TCS)-led consortium also received an order of Rs 15,000 crore ($1.8 billion) from BSNL, for the deployment of a 4G network across India. Last month, even L&T Technology Services announced that it has won $50 million deal in the same vertical.
Telecom business vertical of Indian IT companies has of late been sending mixed signals, with one set of clients signing mega deals, while others ramping down projects and delaying decisions on spends.
According to Jefferies, communication vertical saw a revenue growth decline by 4% in the June quarter, compared to banking financial service and insurance (BFSI) vertical that saw a revenue decline of just 0.8% in the same quarter.
Tech Mahindra which used to get about 40% of its revenue (largest in the Indian IT sector) from CME (communication, media and entertainment) saw the vertical’s contribution fall to 37.8% in the June quarter. The company also said during the earnings call that one of the clients in the same vertical declaring bankruptcy that hurt its top line by about $6-7 million in Q1 FY24.
Analysts expect that IT companies can see more mega deals in near future. Peter Bendor-Samuel, CEO, Everest group, said, “The increasing cost pressures that the telcos faces is going to open the door to large deals like the one HCLTech recently signed”.
Pareekh Jain, founder of Pareekh Consulting, said, “We might see more large deals from telecom clients, given the kind of pressure they are in. While large deals are good for the industry, they may have to compromise on the margin front”.
All the top IT service companies have launched their 5G as a service recently. Tech Mahindra’s management said recently that the enterprise use cases and revenues from the 5G has really not taken off, or is going to take longer than probably anticipated.
Jain added that with many governments now banning Chinese telecom equipment manufacturers, telecom clients are forced to spend more on such equipment by procuring from other suppliers, thereby putting extra pressure on their operating capital.