Tata Communications eyes tie-up with TCS on $6.5 billion data centre push
Amur Lakshminarayanan, managing director and CEO of Tata Communications, said: “Tata Communications has great strengths in data center to data center connectivity; we are the market leader in this regard. When it comes to TCS, there are various areas where we collaborate and this (new data centre) will also be one of the areas of collaboration with TCS.” Mint on Wednesday.
The Tata group’s move through TCS’s planned investment comes at a time when global tech giants are increasing their presence in the country’s digital infrastructure space, especially as the use of artificial intelligence workloads increases and companies demand local data storage.
On Tuesday, Google also announced a $15 billion investment to build AI-focused data centers in the country.
“We will continue to invest to ensure data centers and endpoints are connected with the lowest possible latency, highest resiliency and reliable solutions. We have seen increasing demand for data center capacity in India; we see data center capacity doubling in the next five years,” Lakshminarayanan said. He added that artificial intelligence increases data center capacity acquisition.
Of course, Tata Communications also has a 26% stake in STT Global Data Centers India Pvt. Ltd, according to the company’s annual report for 2024-25.
artificial intelligence package
Apart from connectivity solutions, Tata Communications is also investing in AI cloud and mediated AI solutions and also offers graphics processing units (GPUs) as a service to help businesses manage their cloud computing requirements. In the cloud and security business, Tata Communications recorded 13% annual growth. ₹469 crore in the September quarter.
GPUs are powerful computer chips originally designed to process graphics and images like in video games. Nowadays, they are also used to perform complex calculations on topics such as artificial intelligence, machine learning and big data.
The company is also bullish on its GPU-as-a-service business. Lakshminarayanan stated that the company uses direct liquid cooling technology in its data center connectivity offerings, adding, “Currently, most of the usage (of GPUs) is for education purposes and not so much for inference. In the future, inference will consume 80% of GPUs and training will consume 20%.” he said.
He explained that the technology is beneficial because it consumes less power and ensures that the uptime and availability of the GPU is among the highest levels.
Tata Communications has purchased close to 1,000 GPUs to date but has yet to see a meaningful increase in revenue from the business. It also offers GPUs as a service to companies under the India Artificial Intelligence Mission and uses them internally as well.
“We will not invest in more GPUs if the current 1,000 GPUs are not used,” Kabir Shakir, the company’s chief financial officer, told analysts on an earnings call to discuss September quarter earnings on Wednesday.
When asked about past asset divestments in the data center business, Lakshminarayan said Tata Communications’ sale of some assets in 2016 was due to weak balance sheet and high debt. Today, he said, the company is in a much stronger financial position and is ready to invest, especially given that AI clearly presents a tailwind.
“The logic at that time was very different. The company had a very weak balance sheet, high debts and low margins. Now there is strength in the balance sheet and appetite for investment,” he said.
Red Sea’s revenue dropped
In the September quarter, the company’s revenue increased 6.5% year-on-year. ₹6,100 crore. However, its net profit fell by 27 percent ₹183 crore. The company’s EBITDA (earnings before interest, taxes, depreciation and amortization) margin fell 48 basis points annually to 19.2%.
The company said recent cable outages in the Red Sea had led to a loss of revenue and an increase in costs as it had to divert traffic to alternative channels.
“There is also a cost to repair the cut cables, which includes sending ships out to sea, and all of this is expensive. The costs resulting from these outages will continue in the next quarter.” Lakshminarayanan said, adding that the company is able to cope with cable outages, including those in the Red Sea, thanks to the variety of cables it has around the world.
On September 6, cable outages across the Red Sea, a critical route for both global trade and communications, disrupted internet access in parts of Asia and West Asia. The outage was reportedly caused by outages on two cable systems: the South East Asia-Middle East-Western Europe 4 cable, operated by Tata Communications Ltd, and the India-Middle East-Western Europe cable, operated by a consortium that counts Airtel and Tata Communications as members.
Data Services, which accounts for 85% of Tata Communications’ revenue, increased by 7.3%. ₹5,179 crore during the quarter. Data Services include core connectivity services, digital platforms and connected services.
