Etisalat's move leaves Tech Mahindra worried

MUMBAI, INDIA: With Etisalat calling off its India operations following the Supreme Court’s verdict to cancel 122 telecom licences, its impact is pretty much evident on the IT firms that work closely with operators.

For instance, Tech Mahindra is a dominant player in the telecom industry that has the IT support and service deals with Etisalat.

Also read: Tech M awaits word from Etisalat

Although the size of the deal with the operator in India is of smaller size compared to the outside deals, yet Eltisalat’s decision to move out of India may remain a bit of concern for the Mahindra Group.

During the Q3 results announcements early this month, in reply to a query on licence cancellation and its impact on business, Sujoy Anand, Tech Mahindra’s CFO had commented, “Large exposure to deals with clients are covered by banks.”

On deals with Etisalat, “Tech Mahindra has overseas business with Etisalat as well as business in India, but both are different. However business in India is not large compared to overseas,” Vineet Nayyar, Tech Mahindra’s vice chairman, managing director and CEO had said.

“If we are not paid our dues, we can encash on the bank deposits but have to wait and watch. We should not overly get worried about the revenues paid by Etisalat as they are very marginal,” Nayyar had added.

According to media reports, the deal between Etisalat and Tech Mahindra is estimated to be around $400 million for a 10-year period and bank guarantee is around Rs 500 crore.

However, in coming months many more operators are likely to follow the foot steps of United Arab Emirates-based telecom group and IT firms will have to fetch the bank deposits to overcome the losses rather than revenues from the outgoing operators.