Google and Amazon join the race to buy data business of Tata Communication
Two top notch companies in the world are in a race to buy the data centre business of Tata Communications (TCL). According to media report, the search engine giant Google and e-commerce major Amazon are among those may buy the data centre business of the company in a deal expected to fetch about Rs 4200-4600 crore. The interest from giants is because of their intention to expand the cloud computing infrastructure business in India. Its share price on BSE increased by 3.89 per cent in early trades and trading at Rs 412.65 on intraday basis.
The twin companies are in competition with bulge-bracket private equity funds including the Blackstone Group, Carlyle, KKR, Bain Capital and Advent International. These PE funds are looking to buy up to 74 per cent stake in the data centre unit and take control of the business that is spread across 44 locations in India and abroad. Though the TCL is selling the data center business, the company may retain minority stake in that particular business.
TCL owns and operates data centres in 44 locations and occupies approximately 1 million square feet of space. The company’s hosting capabilities integrate directly into its global IP network to offer maximum traffic capacity into and out of facilities. Its Data and Managed Services include Data Transmission services, data centres, virtual private network, signalling and roaming services, television and other network and managed services. The demand for third party data centres have become increasing nowadays as more enterprises opt to outsource IT infrastructure services.
Financially, TCL's consolidated Data and Managed Services segment contributed around 50.61 per cent of total revenue as of FY15. The segment comprises of revenue worth Rs 9090 crore in FY15. While segment witnessed turnaround in PBIT of Rs 26.57 crore in Q1FY16 against loss of Rs 14 crore in Q1FY15. It posted a net loss of Rs 33.86 crore in Q1FY15 while it had net loss of Rs 21.38 crore in Q1FY14. TCL has net debt of Rs 9178 crore as of FY15. If the transaction goes smoothly then it will help TCL to reduce debt burden and concentrate on its core data carrier business.
TCL is a provider of communications solutions. The Tata global network includes a submarine cable networks, a Tier-1 Internet protocol (IP) network, with connectivity to more than 240 countries across 400 point-of-presences (PoPs). It operates in three segments viz. Global Voice Solutions (GVS), Global Data and Managed Services (GDMS) and South Africa Operations. GVS provides global voice solutions to telecommunications carriers. GDMS provides data services, focusing on international and national private leased circuit enterprise networking services and Internet Protocol (IP) transit services. South Africa Operations include wholesale international voice and data transit, enterprise business solution services.