Tata Consultancy Services (TCS) has secured a long-term contract valued at more than $1 billion from Telefónica UK, marking its first mega deal in nearly two years, according to Mint. Spanning a decade, the agreement is expected to generate over $100 million in annual revenue and offers a significant boost to India’s largest IT services firm after an extended slowdown in winning large-ticket contracts.
Telefónica UK, which operates the O2 mobile brand and is part of Spanish telecom giant Telefónica, has selected Mumbai-headquartered TCS to deliver application management and infrastructure services. A substantial portion of the engagement is said to be new work for TCS, executives familiar with the deal told Mint. While neither company has officially commented, an announcement is expected in the coming weeks.
This deal becomes the fourth billion-dollar-plus contract signed under managing director and chief executive officer K Krithivasan, who assumed leadership in June 2023. Previous large wins under his tenure include a $1.1 billion engagement with the UK’s National Employment Savings Trust, a $1 billion digital transformation deal with Jaguar Land Rover, and a $2.5 billion, 15-year administration contract with British insurer Aviva.
The UK continues to be a strategic market for TCS, contributing about 17% of its $30.18 billion revenue in the last financial year, making it the company’s second-largest geography after the United States. However, people cited by Mint noted that the Telefónica UK deal is expected to deliver lower profitability than TCS’s overall operating margin of 24.2%. This reflects a broader strategic shift, as the company has historically avoided contracts that dilute margins.
The deal follows another margin-pressuring telecom engagement—TCS’s ₹15,000-crore-plus contract with BSNL for 4G network deployment—though executives said the UK deal should be more profitable than the BSNL project. Analysts pointed out that while a $1 billion contract over 10 years adds roughly $100 million annually—equating to about a 0.3% revenue uplift—such long-term deals often improve margins over time as efficiencies are realised.
Phil Fersht, CEO of HFS Research, told Mint that TCS is prioritising predictable growth and strategic account control over near-term margin optimisation. Mega deals of this scale typically involve long sales cycles, often extending up to 18 months. Much of the groundwork for the Telefónica UK contract was led by Amit Kapur, former head of TCS’s UK and Ireland business, before his move to lead the company’s AI and services transformation unit.
The win comes amid heightened scrutiny of TCS’s deal momentum, as peers such as Cognizant, Infosys, and HCLTech continue to secure large global contracts.
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