TCS's $1 bn mega deal ends 2-year dry spell

10-year Telefónica UK pact marks revenue push at the cost of margins

- Jas Bardia & Varun Sood

Tata Consultancy Services Ltd, India's largest software services company, has won a mega deal valued at over $1 billion in revenues over 10 years from Telefónica UK, ending a nearly two-year drought in bagging such large contracts.

The British arm of Spanish telecom giant Telefónica runs the O2 brand of mobile phone services in the UK.

Mumbai-based TCS will offer application and infrastructure work as part of this contract, much of which is new work for the company, said two executives privy to the development requesting that they remain unidentified. A formal announcement is expected in the coming weeks.

This is the fourth $1-billion deal, all in the UK, under managing director (MD) and chief executive officer (CEO) K Krithivasan, who took office in June 2023. That same month, the automaker and TCS are part of the Tata Group. In January last year, TCS bagged its largest deal—a $2.5-billion, 15-year administration contract with British insurer Aviva.

The UK is the second-largest market after the US for TCS making up about 17% of its full-year revenue of $30.18 billion.

Questions sent to TCS and Telefónica went unanswered at the time of publishing.

Both the executives cited earlier pointed to the muted profitability in the Telefónica UK deal, claiming it is lower than TCS's 24.2% operating margin. They did not share more details.