Financial Daily from THE HINDU group of publications
Sunday, Dec 21, 2003
Markets - Recommendation
Info-Tech - Stocks
Tata Telecom: Pare exposures
Mr Niru Mehta, Vice-Chairman, Tata Telecom, Widening customer relationships crucial for growth.
At the current market price, the stock trades at a price-earnings multiple of about 14 times its trailing 12-month per share earnings for 2003-04. It appears that the Tata Telecom valuation has run ahead of its fundamentals and the scope for capital appreciation from these levels may be limited.
Tata Telecom's fundamentals continue to remain on a strong footing. The robust earnings performance for 2003-04 second quarter, strong growth potential for its core focus segments such as converged and call centre solutions and equal joint-venture equity-cum-technical partner in Avaya Inc. US, inspire confidence. However, the challenge of managing slow expansion in its portfolio of offerings, risk of an outsourcing backlash affecting its contact-centre operations and intense competition from global telecom majors, may cloud its growth prospects to some extent.
Solid second quarter
In the latest quarter ended September 30, Tata Telecom has turned in a solid performance. The salient features are:
Over the past three years, Tata Telecom has successfully reduced its dependence on pure voice solutions to its enterprise customers. Instead, it has shifted the focus on its portfolio of offerings from enterprise voice to converged (voice, data and video) solutions (including IP Telephony and teleconferencing) and contact centre/CRM solutions for business process outsourcing companies.
Apart from technical partnership with the US-based Avaya Inc., it has entered into partnerships with Polycom (for video conferencing), Isarel-based NICE Systems (for customer responsiveness) and LG (for EPABX voice products).
It also has alliances with systems integrators such IBM, HP and Servion for converged and networking solutions. Tata Telecom is a leading player in its existing portfolio of offerings, holds a sizeable market share in each of these offerings and has built up a strong reference set of customers.
Each of these offerings also have a strong potential for growth. And the company is well positioned to capitalise on the boom in BPO and enhanced spending in domestic infrastructure.
Risks and concerns
Despite the burgeoning demand for its range of offerings, the company is exposed to t risks such as:
Players such as Nortel, Siemens, Cisco and Alcatel are likely to step up their presence in different communication offerings and put pressure on the margins of Tata Telecom.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line