Tech Mahindra, HCL Tech, Wipro and likes are hoping global 5G race resumes next year — bringing some large deals before that
Tech Mahindra, HCL Technologies, Wiproand other Indian IT companieswill have to wait another two quarters before they see any revenue from 5G spend.
- The uncertainty caused by the coronavirus pandemic has IT companies hesitant to commit to full 5G network rollout.
- The rollout of 5G will mean big deals in the offing for Indian IT services companies.
“5G will happen towards the second half of this year, maybe it gets pushed by six months. That’s where we will probably start seeing some of the operators commit and clearly enter 5G,” Tech Mahindra CFO told Business Insider in an interview.
GlobalData shows that the value and volume of new global IT services contracts are shrinking. The uncertainty around coronavirus has led to operators hitting pause on the full rollout of 5G networks, even if they’ve successfully run trials because they’re waiting for the right time.
But, many deals are already in the works and research firm Omdia estimates that there are 56 deals that are set to come up for renewal in the telecom space before December worth nearly $13.9 billion — including those of Nokia and IBM.
New deals in the making
“In 2025, we believe there will be 2.8 billion 5G subscriptions in the world,” said Ericsson’s APAC CTO Mark Ewerbring. “The total number of subscriptions is even higher at 8.9 billion. So 5G in itself is 31% of the connections,” he added.
HCL Tech is currently in the progress of acquiring Cisco’s self-optimizing network called SAN. “This along with some of the products that we have in the telecom space under our ER&D segment is gradually helping us create a niche portfolio of telecom products which are particularly relevant in the 5G world,” said the company’s CEO C Vijayakumar.
HCL Tech already beat TCS for a $600 million deal with Ericsson — one of the early adopters of 5G — to provide infrastructure management, cloud and application services.
Wipro’s new CEO Theirry Delaporte with his impetus on ‘profitable growth’, is also looking at the potential of 5G not just in terms of communications, but also in other verticals like accelerating the adoption of cloud in different markets.
Gartner estimates that the worldwide 5G network infrastructure market revenue will almost double in 2020 to reach $8.1 billion. For IT services companies, this means bigger deals in the making.
For instance, Tech Mahindra grabbed a $1 billion deal with AT&T Communication last year — its largest deal ever. And, the company is also reportedly working with ITI Limited to create a 4G solution for BSNL that can be upgraded to 5G.
“The way we are looking at 5G is that it will be additional growth. On top of whatever we’re already doing. And that’s what I think we’ll get as a slip into the financial year 2021-22,” said Bhat.
Tensions against China
Bhat believes that geopolitical tension between the US and China won’t play a big factor in the US but could have an impact on other markets. In India, for instance, China’s Huawei and ZTE will reportedly be kept out of the upcoming 5G trials scheduled for September.
India’s actions follow in the footsteps of other countries like the UK and Australia, which have also raised concerns against including Chinese companies in their 5G trials due to data security concerns highlighted by the US.
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