Wednesday, September 19, 2012

KPN to replace BT as largest client of TechM in next 3-5 years.

KPN Royal Dutch Telecom, which earlier this month signed an international partnership agreement with Tech Mahindra, may in three to five years replace BT as the Indian firm’s single largest customer, a top Tech Mahindra official told Financial Chronicle.
“The partnership could become as big as the one we have with BT in terms of revenues; we will not only get service-related revenues from them, but also sell a suite of products developed by us and our subsidiary CanvasM using the KPN client base and network in the Netherlands, Germany and Belgium,” he said.

Last week, Erik Hoving, chief of strategy, innovation and technology of KPN Royal Dutch Telecom, told media here that his company had signed a major services contract with Tech Mahindra. “We are also in the process of negotiating a second major contract with Tech Mahindra that we cannot disclose at the moment,” he added.

KPN said in a press release early this month that it expected savings of at least ¤200 million (Rs 1,414 crore) over the five-year period of partnership. The Indian firm signed the contract for the development and support of over 150 applications in the operational IT systems of the Dutch firm and help it simplify its IT environment and operational process.

“We would like to understand how mobile service operators in India are profitable and enjoy the Ebitda margins they do at the average revenue per user that they do,” said Hoving.

KPN will also resell a wide variety of solutions developed by Tech Mahindra on a revenue share basis. While Tech Mahindra will provide solutions to KPN customers either on its own or in collaboration with other software service providers, KPN will own the customer relationships and will bill the customers for an integrated service offering.

“We do not provide application maintenance and development services to our corporate clients. Also, we only provide infrastructure management services to our customers. The tie-up will allow us to offer a much larger bouquet of offerings on the B2C side, such as mobile payment and also on the B2B side, leveraging Tech Mahindra’s deep domain knowledge,” said a KPN official involved in the transaction.

As part of the partnership, KPN will reduce the number of telecom software suppliers it works with.

BT, a JV partner of Tech Mahindra, is the company’s single biggest customer, now accounting for 37 per cent of its revenues. However, its contribution has declined steadily as Tech Mahindra focused on widening its non-BT share of revenue.

BT has also been steadily selling its stake in Tech Mahindra and wants to prune it further. Experts say BT may look towards exiting Tech Mahindra completely by the time it merges with Mahindra Satyam.

At the end of August, BT sold 14.1 per cent in Tech Mahindra for Rs 1,395 crore, taking its stake down to 9.1 per, cent and hinted at further dilution in the future.

Two BT-nominated directors, Richard Cameron and Nigel Stagg, resigned last December from the Tech Mahindra board.


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