Tata Communications  consolidated revenues fell 4.1% QoQ to Rs 42.2 bn (5.6% miss) on the back of decline in the Voice and Data segments. Tata Communications Voice segment’s revenue stood at Rs 6.7 bn (11.2% down QoQ) and Data segment’s revenue was down 2.6% QoQ to Rs 35.5 bn. This was attributable to factors such as seasonality and Covid related weakness in deal conversions. EBITDA declined 9.6% QoQ to Rs 10.5 bn (9.5% miss), weighed by 60%/7.4% decline in Voice/Data to Rs 200 mn / Rs 10.3 bn. Subsequently, the EBITDA margin shrank 150bp to 24.8%. Adjusted for a Rs 700 mn one-off benefit in Q2 FY21 related to Covid and another one-time benefit, EBITDA declined 4% QoQ.

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Tata Communications has reported exceptional items of Rs 114 mn toward interest on unpaid provisions for licensee fees – for which the company made provisions of Rs 3.4 bn toward the DoT’s demands in the AGR case in Q4 FY20 and an additional Rs 223 mn in first half of FY21. Other income declined 89% QoQ to Rs 82 mn. Subsequently, Tata Communication’s PAT decreased 19.6% QoQ to Rs 3.1 bn; adjusted PAT (for exceptional items) stood at Rs 3.2 bn – down 27% QoQ, indicating a 13% miss. Capex stood at Rs 3.4 bn in Q3 FY21 v/s Rs 3.2 bn in Q2 FY21. Net debt fell by Rs 6.6 bn QoQ to Rs 79.7 bn.

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Segmental details:

Tata Communications data revenue / EBITDA declined 2.6%/7.4% QoQ to Rs 35.5 bn / Rs 10.3 bn (contributing 98% to total EBITDA), with margins at 28.9%. Revenue was lower due to a seasonally weak quarter and fewer deal conversions (Covid-related). Adjusted for an Rs 430 mn one-off benefit in Q2 FY21, EBITDA declined 4% QoQ. The Traditional segment (contributing two-thirds to data revenue) grew 0.7% QoQ to Rs 22.9 bn, led by growth in the Enterprise and OTT segments. EBITDA fell 3.4% to Rs 9.8 bn and the EBITDA margin shrank 190 bps QoQ to 42.9%.

Tata Communications Growth segment saw 10.7%/16% revenue/EBITDA decline to Rs 8.1bn /Rs 1.3 bn due to seasonality and slower deal conversions (Covid related); the EBITDA margin shrank 100bp to 15.6%. The Innovation segment’s revenue decreased 11.1% QoQ to Rs 320 mn and EBITDA loss increased to Rs 1.03 bn (v/s loss of Rs 800 mn in Q2 FY21). The Transformation segment saw QoQ revenue decline of 3.3% to Rs 3.2 bn; it once again turned EBITDA-negative, with loss of Rs 90 mn (v/s EBITDA of Rs 40 mn in Q2 FY21). This segment’s revenue/profitability is impacted due to lower transaction volumes, while transaction costs continue. The company has deals in the order book, but the execution is taking longer as Covid restrictions persist.

Tata Communications Voice segment’s revenue/EBITDA declined 11.2%/60% QoQ to Rs 6.7 bn / Rs 200 mn. Adjusted for an Rs 310 mn one-off benefit in Q2 FY21, due to the timing of the booking cost, EBITDA grew 5% QoQ. Revenue was affected by the lockdown as average transactions fell to 77 in Q3 FY21 (v/s 89 in Q3 FY20).