Tata Consulatancy Services telecom earnings spurt widens gap with Infosys
The spurt in TCS's telecom revenues also contributed to the company beating street expectations as it was factored in as a weak vertical.
By Pranav Nambiar, TNN | Updated:
BANGALORE: One of the key differences between TCS and Infosys in the first quarter of this fiscal was the growth rate in the telecom vertical.
The vertical had been sluggish over the last few quarters for both companies. However in the April-June quarter, TCS’s telecom revenues jumped 24% annually and 14.3% sequentially. For Infosys the corresponding numbers were –7 .8% and –7 .1% respectively.
Analysts say telecom played an important role in widening the gulf in growth rates between the two companies in Q1. TCS had an overall year-on-year growth of 31.4% and Infosys had 20.8%. In the 2010-11 fiscal, the difference was narrower, TCS grew at 24.3% and Infosys at 20.9%.
In Q1 of this fiscal, TCS outgrow Infosys in most industry segments including banking, financial services and insurance (BFSI) and manufacturing. Though in absolute numbers BFSI was the biggest differential, in terms of growth rates, the disparity in the telecom vertical was the most stark.
The spurt in TCS’s telecom revenues also contributed to the company beating street expectations as it was factored in as a weak vertical. For both companies the telecom vertical contributes about 10-12% of revenues.
Wipro’s CEO for its IT business T K Kurien during the company’s Q1 earnings conference said that the growth in the telecom sector is coming from the emerging markets and wireless technologies that it adopts.
TCS’s larger exposure to emerging geographies and expertise in wireless technologies is seen to have helped the company grow in the previous quarter. Infosys in contrast lags as it is more focused towards the developed markets and in wireline technologies.
TCS CEO N Chandrasekaran said during a conference call that in India, Asia Pacific and Middle East & Africa, they are seeing significant growth and have also won some transformational projects there.
Chandrasekaran added that the growth can be attributed to discretionary spends which are sizeable. However, he added that annuity kind of contracts (which bring in revenues continuously over years) are yet to emerge and therefore earnings volatility can be expected going ahead.
The vertical had been sluggish over the last few quarters for both companies. However in the April-June quarter, TCS’s telecom revenues jumped 24% annually and 14.3% sequentially. For Infosys the corresponding numbers were –7 .8% and –7 .1% respectively.
Analysts say telecom played an important role in widening the gulf in growth rates between the two companies in Q1. TCS had an overall year-on-year growth of 31.4% and Infosys had 20.8%. In the 2010-11 fiscal, the difference was narrower, TCS grew at 24.3% and Infosys at 20.9%.
In Q1 of this fiscal, TCS outgrow Infosys in most industry segments including banking, financial services and insurance (BFSI) and manufacturing. Though in absolute numbers BFSI was the biggest differential, in terms of growth rates, the disparity in the telecom vertical was the most stark.
The spurt in TCS’s telecom revenues also contributed to the company beating street expectations as it was factored in as a weak vertical. For both companies the telecom vertical contributes about 10-12% of revenues.
Wipro’s CEO for its IT business T K Kurien during the company’s Q1 earnings conference said that the growth in the telecom sector is coming from the emerging markets and wireless technologies that it adopts.
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Wipro recorded a 15.2% annual growth and a 1.8% sequential decline in the telecom vertical. Ankur Rudra, IT analyst at Ambit Research, said that the outsourced telecom work from emerging geographies is a combination of system integration, infrastructure and hardware provision. TCS’s larger exposure to emerging geographies and expertise in wireless technologies is seen to have helped the company grow in the previous quarter. Infosys in contrast lags as it is more focused towards the developed markets and in wireline technologies.
TCS CEO N Chandrasekaran said during a conference call that in India, Asia Pacific and Middle East & Africa, they are seeing significant growth and have also won some transformational projects there.
Chandrasekaran added that the growth can be attributed to discretionary spends which are sizeable. However, he added that annuity kind of contracts (which bring in revenues continuously over years) are yet to emerge and therefore earnings volatility can be expected going ahead.
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Accenture and IBM have also posted good telecom numbers in the quarter. The telecom vertical in recent years has been weak for IT companies as the telecom infrastructure in the biggest telecom markets, US and Europe, has been largely built out. The telecom sector has a distinct cycle of boom and bust driven by regulatory or technology changes. There have not been any significant developments in either of these fronts lately. IT outsourcers including telecom equipment manufacturers like Cisco and service providers like British Telecom have slowed their expansions in the US and Europe. Most of the outsourced work here is application management work.
Wipro’s Kurien said that by the third quarter he expects the vertical to see good recovery, but it will not see the growth levels we had previously been used to. “The growth forecast in data traffic, and increased digital consumption of media is expected to drive investments in 3GLTE, 4G, WIMAX etc,” he said.
DARK HORSE
The spurt in TCS’s telecom revenues contributed to the company beating street expectations as it was factored in as a weak vertical TCS’s telecom revenues jumped 24% annually and 14.3% sequentially. For Infosys the corresponding numbers were –7 .8% and –7 .1% respectively TCS’s larger exposure to emerging geographies and expertise in wireless technologies is seen to have helped the company grow in the previous quarter.
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