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Adith Charlie

Mumbai, Nov. 3 Indian information technology firms are seeing a slowdown in IT spending by telecom companies that have operations in developed markets such as the US and Europe.

Tech Mahindra, the country’s largest telecom solutions provider, recently told analysts that it is seeing signs of budget constraints and cost reviews in some customers, largely due to the ‘seismic activities in the economic sector globally’.

“The recent events have not had any direct impact on our business; but given the tough environment we do anticipate the demand to tighten, and pressure on IT spend in our customer base,” Mr Vineet Nayyar, Vice-Chairman, Managing Director and CEO of Tech Mahindra, has said during a conference call.

In Europe and different parts of North America, there has been a downward trend in the number of telecom subscribers added every quarter. Moreover, the enterprise segment for telecom companies is under pressure as many corporations have put their telecom modernisation plans on hold due to the credit crisis, said Mr Sourabh Kaushal, Industry Manager, ICT Practice, Frost & Sullivan.

To add to all this, telecom companies are finding it difficult to raise funds to meet their capex needs. All these factors have made them go slow on IT spending.

Mr Suresh Senapathy, Chief Financial Officer, Wipro, had recently told Business Line in Bangalore that telecom companies have been witnessing a downturn for quite some time now.

Though Mr Senapathy expects a short-term reduction in business for IT companies, he is confident of the situation improving in the next two or three quarters.

After the financial services space, it is the telecom industry that generates the highest revenue for Indian IT companies. Generally, IT companies help maintain and develop the applications portfolio of large carriers, network gear makers (such as Alcatel-Lucent, and Nokia Siemens) and mobile handset makers such as Nokia, and Motorola. Of late, IT companies have also been doing high-end value-added work such as engineering and R&D services.

Mr N. Chandrasekaran, Chief Operating Officer and Executive Director of Tata Consultancy Services, does not agree that the slowdown in the telecom vertical can be attributed to the global credit crunch.

“In mature markets, we are seeing fewer opportunities with clients largely due to the strong off-shore leverage that many of the large telcos have. I cannot say that the overall spending of the telecom sector is coming down, but you will have client-specific issues,” he said.

However, growth rates for the telecom business in emerging economies still continues to be robust, analysts and industry officials said.

More Stories on : Outlook | Telecommunications | Software

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