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Tech Mahindra is set to strengthen its presence in the network services segment by acquiring US-headquartered Lightbridge Communications Corporation (LCC) for $240 million. The deal takes the Mahindra group company a step closer to its ‘stretch goal’ of clocking $5 billion in revenue by 2015-end.
The acquisition will expand Tech Mahindra’s revenue from the US and bolster its ability to compete for contracts involving network technologies such as Voice-over-Long Term Evolution (VoLTE), network testing, and so on, said CP Gurnani, Chief Executive Officer and Managing Director of the Mahindra group company, in a conference call with newspersons.
“The LCC deal will give us access to 20-30 new clients in North America, Israel and Asia. Tech Mahindra’s network consulting and operation services, in conjunction with LCC’s network engineering and field services, will provide a wider range of services to our common client base,” said Gurnani. The company estimates the network services market to be worth $40 billion globally.
As part of the deal, the cash outflow from Tech Mahindra will be over $200 million as it intends to pay off the $85 million debt on LCC’s books.
Established in 1983, LCC provides technical services to large wireless operators in the Americas, Europe and Asia. LCC is said to have designed more than 350,000 cell sites for over 400 customers. It is expected to close calendar 2014 with revenues of $430 million. At 8 per cent, LCC’s profit margin is lower than Tech Mahindra’s, which was at 19.9 per cent for the September quarter.
“Over the next few quarters, the team at LCC has committed to increase margins and bring them to the 20 per cent range,” said Gurnani.
As part of the deal, Tech Mahindra will absorb LCC’s 5,700 employees spread over 50 countries, taking the workforce of the combined entity to over 100,000. The deal is expected to close by the first quarter of 2015.
Tech Mahindra shares rose 2.97 per cent to close at ₹2,704.2 on the Bombay Stock Exchange.
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