Telefónica UK has given Tata Consultancy Services (TCS) a long-term contract worth more than USD 1 billion, as per Mint report. This is TCS’s first big deal in nearly two years. The contract will run for 10 years and may bring in over USD 100 million every year.
Telefónica UK runs the O2 mobile network in Britain and is part of Spain’s telecom group Telefónica. Under the deal, TCS will provide IT infrastructure and application management services. A large part of the work is said to be new business for TCS. An official announcement is expected soon.
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More Billion-Dollar Deals Under New CEO
Since K Krithivasan became CEO in June 2023, TCS has signed four deals worth USD 1 billion or more. Which includes: USD 1 billion digital deal with Jaguar Land Rover; USD 1.1 billion agreement with the UK’s pension body, USD 2.5 billion, 15-year deal with British insurer Aviva
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UK Remains a Key Market
The UK is TCS’s second-largest market after the US. It contributed nearly 17% of TCS’s total revenue of $30.18 billion in the last financial year.
Sources say the Telefónica UK deal has lower profit margins than TCS’s overall average. This follows another telecom deal with India’s state-run BSNL, which also put pressure on profits. However, officials believe the UK deal will be more profitable than the BSNL project.
USD 1 billion deal over 10 years adds only about 0.3% to annual revenue at current levels. But analysts say such long contracts often become more profitable over time as costs reduce and efficiency improves. Experts note that TCS is focusing on stable growth and long-term clients, even if short-term profits are lower.
Long Sales Process Behind the Deal
Big contracts like this usually take up to 18 months to close. Former UK head Amit Kapur played a key role in building the relationship before moving to lead TCS’s AI and transformation unit.
Tough Competition From Rivals
TCS has struggled to win very large deals recently, while competitors have moved ahead -- Infosys won major deals from Liberty Global and the UK health system. HCLTech secured a USD 2.1 billion deal with Verizon. Cognizant landed a USD 1 billion healthcare IT contract in the US
Analyst Concerns Remain
Some analysts expect weak growth for TCS in the coming years. The company has also lost several large contracts to rivals, raising concerns about its ability to keep pace in the global IT services market.