Tata Communications’ data business drives strong momentum, backed by robust performance in Growth Services

‘Growth Services’ grew 35.6% YoY | ATM business breaks even in Q4

Declares final dividend of INR 4.50 per share  

Mumbai – May 10th 2018 – Tata Communications today announces its financial results for the quarter and year ended March 31st 2018.

Highlights | FY2018

• ·Data business revenues grew by 4.4% YoY, on the back of strong performance in Traditional and Growth Services.
• Traditional services witnessed steady growth of 3.9% YoY despite industry headwinds; the growth was led by ILL and Ethernet both of which grew by 14% YoY, VPN grew by 10% during the same period. This has been industry leading growth.
• Growth services continued to witness strong momentum with a YoY growth of 35.6%. The growth rate has doubled from 18.4% in FY17. Within this portfolio IZO services grew by over 300% and Security services grew by 64% YoY.
• The revamped Go-To-Market strategy has started to show positive results with an improvement both in funnel adds as well as in closed sales. We added 493 new customers during the year; product penetration ratio which is the number of products sold to each customer has improved from 1.75 in FY17 to 1.93 in FY18.
• Consolidated revenues declined primarily because of lower volume and price compression in Voice and currency translation impact.
• Consolidated EBITDA was lower due to decline in Voice EBITDA, investment into Growth & Innovation services and de-growth in Payment Solution business. Full year margins expanded by 40 Bps; aided by higher margin in TCTSL and Traditional Data services.
• TCTSL revenues grew by 9.8% YoY, EBITDA for the year grew by 25.6% on the back of improved quality of revenue and cost efficiencies.
• TCPSL (ATM business) broke even in Q4 on account of pick up in number of transactions and cost optimisation initiatives.
• In FY18 there was a consolidated loss of INR 328.6 crore due to exceptional losses during the year on account of impairment of investments and other one offs.

Highlights | Q4 FY2018

• Consolidated revenue declined by 2.6% QoQ and 6.6% YoY primarily due to decline in Voice revenue (9.5% QoQ and 26.3% YoY), this was due to both price and volume compression globally.
• Data business revenues grew 0.4% QoQ and 4.0% YoY, on the back of strong performance in Growth Services.
• Growth services trajectory was strong and revenues grew by 8.3% QoQ and 37.3% YoY. Cloud services, Security and Hosting solutions have witnessed very strong growth.
• Traditional Services revenue declined by 1.8% QoQ but increased 1.1% on a YoY basis. Within this portfolio, ILL grew by 12.2% YoY and Ethernet grew by 9.4% YoY. The decline was due to impact of operator consolidation and churn.
• QoQ Data margins were lower as margins were impacted due to upfront investment in new wins for which the revenue is expected to come in FY19 onwards.

Commenting on the results, Vinod Kumar, MD and CEO, Tata Communications, said: “FY18 has been a reset year for Tata Communications, as we transformed our portfolio and operating structure to make us more competitive and responsive to the evolving needs of our customers. At the same time, the success of our growth services portfolio has enabled us to move from a pure connectivity provider to a next generation digital infrastructure provider. Separately, the land demerger proceedings are headed in the right direction and will benefit shareholders who have steadfastly stood by us.”

Commenting on the results, Pratibha K. Advani, CFO, Tata Communications, said: “The momentum created by our data services portfolio is driving a shift in our performance. Data services contribute more than 87% to the overall EBITDA. The improvement in the margin profile will get more apparent as we scale up the growth and innovation services segments.

The strategy of enhancing utilisation of underlying infrastructure through collaborative partnerships globally is winning us stickier engagements with large enterprises. We are focused on cost discipline and productivity gains thus ensuring that the transformation in business profile also generates meaningful impact on the bottom-line in future.”

—————————————————————————————————————————————-

[1] Traditional services include Virtual Private Network, International Private Line, Internet Leased Line, Ethernet, Internet Protocol –Transit, Inmarsat, Content Delivery Network, National Private Line, Mobility, Data Centre, Unified Collaboration and Conferencing

2 Growth services include IZO™, Managed Hosting, Managed Security Services, Broadcast, Video Connect, SIP Trunking, Global Hosted Contact Center, Video Streaming, Mobile New Services, Healthcare, Media Management and Mobile Innovation.

3 Core – Consolidated less Neotel

Key corporate highlight

• In the financial year FY18, Tata Communications Limited had filed a Scheme of Arrangement and Reconstruction for demerger of Surplus Land to Hemisphere Properties Limited (“HPIL”) with the National Company Law Tribunal (“NCLT”). The scheme was approved by the company’s shareholders on May 10th 2018. Tata Communications Limited will now obtain further necessary approvals before the scheme can come into effect.

Business highlights |  Q4 FY2018

• Tata Communications helps Surbana Jurong take lift security in the Internet of Things to the next level: Tata Communications is working with Surbana Jurong to equip its Internet of Things (IoT) enabled lifts and escalators with secure, scalable connectivity to Microsoft’s Azure cloud platform. As a key part of its Smart City in a BoxTM solution, Surbana Jurong’s Lift Monitoring System enables property management companies and public sector organisations to remotely monitor the safety and maintenance of lifts and escalators. The IoT-enabled monitoring system uses artificial intelligence tools on a Microsoft Azure cloud platform to predict when a lift or escalator is likely to fail, and trigger an alert for maintenance before a breakdown occurs.
• Tata Communications lights the way for Jamshedpur Utilities and Services Company (JUSCO) with India’s largest deployment of smart streetlights: Tata Communications and MOTWANE have successfully completed India’s largest deployment of smart streetlights for JUSCO. The new streetlights are underpinned by Tata Communications’ public Internet of Things (IoT) network based on LoRaWANTM technology in India, which is the largest of its kind in the world. With 300 lights, JUSCO’s project in Jamshedpur is the biggest smart street lighting deployment of its kind in India. It will pave the way for a total of 15,000 lights to be installed in the city in the next 5 years.
• Tata Communications positioned as a Leader in the Gartner Magic Quadrant for Network Services, Global for the fifth consecutive year: Tata Communications has been positioned by Gartner as a Leader in its 2018 Magic Quadrant for Network Services, Global. The Magic Quadrant is designed by Gartner to examine how effectively providers meet the current needs of business in terms of both ‘completeness of vision’ and ‘ability to execute’, and 2018 marks the fifth year in a row that Tata Communications has been positioned in the Leaders quadrant.
• F1® TV app powered by Tata Communications brings live Grand Prix action directly to fans’ mobile devices for the first time: Tata Communications, the Official Connectivity Provider to Formula 1®, is powering the new F1® TV mobile app, which will transform how people are able to watch and engage with the sport. Starting with the 2018 season, Formula 1® will use the app to deliver the action live from every race to fans directly, and expand its reach to new audiences. The wealth of video content will give fans the freedom to choose which part of the action they follow at any given moment on or off-track. Practice sessions and qualifiers will also be offered live, along with press conferences pre and post-race interviews.
• Over 90% Indians want IoT at home to avoid FOLO (Fear of Lights On) – but only 15% associate IoT with better access to public services. Tata Communications calls for a ‘Civic Operating System’ that will underpin next-generation IoT-enabled public services and form the basis of a new social system: Over 90% Indians want IoT at home to avoid FOLO (Fear of Lights On) – but only 15% associate IoT with better access to public services: Tata Communications today published its inaugural “India IoT Report”, which reveals that more than 65% Indians suffer anxiety over fear of leaving the lights on when they are away from home – and believe that connected technology could help alleviate this anxiety. The survey was conducted across 2,000 respondents from 12 Indian cities to gauge people’s awareness levels around the concept of the Internet of Things (IoT) and views on its impact on their day-to-day lives.
• Taiwan’s largest mobile network operator Chunghwa Telecom makes a play for the Internet of Things with Tata Communications: Tata Communications is joining forces with Chunghwa Telecom, Taiwan’s largest mobile network operator, to bring global connectivity to consumer electronics and industrial Internet of Things (IoT) devices. Tata Communications MOVE – IoT Connect™ allows IoT devices to be deployed quickly both locally and internationally by leveraging Tata Communications’ ecosystem of mobile network operators worldwide. As part of this ecosystem, Chunghwa Telecom will be able to tap into additional revenues by connecting IoT devices through Tata Communications MOVE™.
• Move into the age of digital parenting with the Omate x Nanoblock smartwatch for children: Tata Communications and wearables maker Omate are working together to equip the new Omate x Nanoblock children’s smartwatch with instant, secure, global connectivity straight out of the box. With a Tata Communications MOVE – IoT Connect™ SIM built in, the Omate x Nanoblock will pave the way towards a new frontier of digital parenting. Smartwatches such as the Omate x Nanoblock help parents stay connected with their children and know exactly where they are when needed.
• Tata Communications teams up with Oracle to drive digital transformation for global enterprises: Tata Communications announced a collaboration with Oracle to offer enterprises from more than 150 countries dedicated and private access to Oracle Cloud, helping them innovate through new services and business models and drive their digital transformation on a global scale. Through this collaboration, enterprises worldwide will be able to access the Oracle Cloud Infrastructure via the FastConnect service using Tata Communications’ IZO™ Private Connect. The combination of IZO™ Private Connect and FastConnect allows enterprises to bypass the public Internet altogether and provide employees with more reliable, seamless access to data and applications using their WAN.
• 2018 Global Talent Competitiveness Index: Talent Diversity and Competitiveness will fuel the future of work: The Global Talent Competitiveness Index (GTCI) report was produced in partnership with The Adecco Group and Tata Communications. GTCI is an annual benchmarking report that measures the ability of 119 countries to compete for talent. The GTCI report found that Switzerland still leads the way in terms of talent competitiveness, followed by Singapore and the United States.
• HKA Consortium and Alcatel Submarine Networks to roll out new trans-Pacific optical communications system linking Hong Kong to America over 13,000 kilometers: The Hong Kong-Americas (HKA) consortium and Alcatel Submarine Networks (ASN) have signed a turnkey contract for the deployment of the Hong Kong-Americas (HKA) submarine cable network, which will span more than 13,000 kilometers. This new open cable system will increase connectivity between Hong Kong and the US and will reinforce Hong Kong’s role as a key communications hub in the Asia-Pacific region. The HKA consortium includes China Telecom, China Unicom, Facebook, Tata Communications, and Telstra as the major parties.
• Tata Communications’ Ultra Live Video Delivery Network ensures fans are able to enjoy immersive entertainment experiences on any device in sync with live TV broadcast: Tata Communications has been chosen by Ultracast to power the international expansion of the company’s 360° video and virtual reality (VR) platform. Ultracast creates live 360° video and VR content in motorsports series such as NASCAR, FIA World Endurance Championship, 24 Hours of Le Mans, as well as other sporting categories such as boxing, rugby and professional bull riding. The company will use Tata Communications’ Ultra Live Video Delivery Network (VDN) to bring this content from events globally to fans’ smartphones, tablets and VR devices in complete sync with live TV broadcasts.

An Investor fact sheet providing a detailed analysis of the results for the quarter and year ended March 31st 2018 has been uploaded on the Tata Communications website and can be accessed at:

https://www.tatacommunications.com/wp-content/uploads/2018/05/FIN-investorfactsheet-PDF-20180510.pdf

Tata Communications was the Official Connectivity Provider of Formula 1® between 2012 and 2019. Tata Communications was also the Official Managed Connectivity Supplier to Mercedes-AMG Petronas Motorsport, and Official Digital Transformation Partner to ROKiT Williams Racing until the end of the 2019 season.