Can Tata Communications balance expansion plans with margin pressures in a volatile market?

Formula 1 has, over seven decades, remained one of the foremost sporting attractions globally. And guess what? An Indian company enables the broadcast of the race to over 500 million fans in at least 180 countries. In 2022, Formula 1 and Tata Communications announced a multi-year strategic collaboration, under which the latter was made the official broadcast connectivity partner of the races.

In under 200 milliseconds, video feeds move from the venue of the race to a remote production site in London, before making their way to the viewing device. This is what media companies do, but Tata Communications is not one. Its network provides international call services, but it’s not just a telecom company either. It would be best to describe the company as operating at the confluence of both, in a zone called communication technology, courtesy the 5,00,000 km of sub-sea cables that serve enterprises and internet service providers.

All this is enabling the company to bat for a play in the digital space. The high-value solutions it is targeting call for expertise in cloud computing, mobility, security, artificial intelligence (AI), Internet of Things (IoT), and more.

CHANGE IS CONSTANT

The business model of Tata Communications is not easy to grasp. One reason, among others, is the sheer pace of transformation, from a voice player at the turn of the century to building a big play in data and digital. The company followed strategies in line with what was the need of the hour.

“One of the reasons we are not understood very well is because there is no other comparable company,” says the company’s MD & CEO, A S Lakshminarayanan. Before his current position, he had a long stint with Tata Consultancy Services (TCS), where he was running markets like Japan, the UK and Europe, apart from being the global head of media and information services. “We have an interaction fabric, a network fabric and a cloud fabric. Nobody else has that, and since each of these has a different profile, one cannot put them on a single spreadsheet.”

The metamorphosis of Tata Communications has been an ongoing process and has not been easy. Earlier known as Videsh Sanchar Nigam, the Tata group purchased it from the government through a disinvestment process in 2002. Interestingly, difficult situations led to newer opportunities and, inevitably, a different way of thinking. When Lakshminarayanan took charge in October 2019, from a financial perspective, it was a difficult period. Investors were also unhappy. There was nothing remarkable to speak of when it came to customers. “If they wanted five things from us, it was often a case of being able to do 2A or 3B. We were not aiming to solve a problem, and that reduced customer relevance,” he says. What compounded the problems was that the meetings were held with the head of networks, not with the chief information officer (CIO).

AI-FIRST JOURNEY

When a company is in good financial health, other aspects like product, go-to-market and skills can be approached with more confidence and it can make mergers and acquisitions (M&As) more meaningful. Between December 2022 and June 2023, the company made two acquisitions. First was Switch (at $59 million), a live production and video transmission services provider. It then bought Kaleyra, a distressed asset (at $100 million plus a debt of around $180 million) that is an integrated communications platform as a service (CPaaS) player. In December 2025, Tata Communications acquired a 51% stake in Commotion Inc, an AI-native SaaS platform company with US and India operations, for Rs 227 crore. A statement then outlined the reasons for the purchase and subsequent integration of capabilities into the company’s own digital fabric (a phrase Lakshminarayanan uses often through our conversation) and how it “will accelerate AI adoption and advance the journey to becoming an AI-first organisation.”

Tata Communications could be studied as a part of the global telecom system. A September 2025 report from CareEdge Ratings states the importance of the company “owning and operating the world’s only wholly owned subsea fibre ring” that has a significant share of international voice and data traffic. It goes on to outline a favourable industry outlook, with increasing data consumption, cloud migration, adoption of CPaaS solutions, and rising demand for network security services driving growth opportunities.

Around 84% of the company’s FY25 revenues came from data. The digital platforms and services sub-segment has expanded rapidly on the back of acquisitions and enterprise demand. “While the business is concentrated in data, this risk is mitigated by the breadth of services within DMS (data managed services) and the company’s well-diversified geographic and customer base (no single customer having over 10% of revenues; India at 38% and the US at 21%). The combination of strong infrastructure, scale and industry tailwinds underpins Tata Communications’ market leadership and revenue visibility,” it says.

PLAYING AT THE BIG TABLE

The company has clinched several interesting assignments, apart from Formula 1. In late 2023, it signed a deal with JLR (a brand owned by Tata Motors) for digital transformation. This was a key part of JLR’s Reimagine strategy. A year later, that partnership was expanded to enhance connected vehicle capabilities across 120 countries.

Sumeet Walia, EVP & Chief Sales & Marketing Officer, Tata Communications, thinks this was important to drive home the point on how they could be relevant to customers. “If you ask JLR today a question on Tata Communications’ relevance in its own ecosystem, there is a good chance they will speak of us as being a core part of their central digital nervous system. That’s the strength of relevance that we have managed to reach,” he says.

Understandably, this is not an easy process. According to Walia, positioning technology is only part of the story. “But by positioning myself to have the ability to solve a customer’s problem, I need to understand the problem first. So, it is that pain-gain equation that we are really trying to work with,” he says. Much of that progress made has not been missed by those who track the company. “Of course, Tata Communications has a complex model. The digital part has multiple legs with AI, data centres, IoT, 5G/6G. The interesting part is that each is getting integrated with the business,” says Deven R Choksey, Chairman and MD of wealth management and investment advisory firm DRChoksey Finserv. The challenge, he says, lies in existing customers being more demanding, making the process of continuous innovation critical. “To that extent, scaling up will always be tricky. The business overlap with group companies like TCS, Tata Elxsi does exist, though scale and size will differ,” he says.

How much has changed at Tata Communications over two decades is a crucial story. Vibhor Singhal. Executive Director, Nuvama Institutional Equities, says the acquisition of Tyco, a subsea cable system operator (in 2004 for $130 million), was the first big pivot. It gave them a big play in data connectivity. “The next pivot was before the pandemic and marked the shift to a digital-first approach, leading to Tata Communications becoming a one-stop solution for multiple needs. That included next-gen connectivity solutions, cybersecurity solutions or move to cloud and specific solutions for the media vertical,” he explains. Importantly, in October 2024, the company announced that it would incorporate Nvidia software into its AI cloud offerings. These will be powered by Nvidia Hopper GPUs.

Tata Communications has also developed IoT, signalling that it does not want to be a pure-play IT company, and would rather position itself as a services player. “That seems rational given that companies work with several vendors on cloud, switches, CPaaS, among other things. CTOs realise the need to consolidate, making it a very attractive opportunity for Tata Communications,” he says. The hitch lies in the pace of technological change that can easily hamper a business model.

Walia sees Tata Communications facing a “once in a generation opportunity.” He looks back at some of the other big technological shifts to emphasise his point. “It took two decades for the internet and one decade for the mobile. Cloud took a decade, and now with AI and GenAI, that shift will be seen in the next three-four years,” he says.

All eyes will be on how the company will up its game from here on. Maybe it needs to disrupt itself once more, not for survival but just to get better. For Tata Communications, an interesting phase of growth has barely started to unfold.

@krishnagopalan