Low tech spend hits telecom vertical in IT

In terms of IT servcies, we see a broad-based recovery, but certain industry verticals such as telecom & media will remain under pressure - Mrinal Rai, Assistant Director & Principal Analyst at ISG, tells Bizz Buzz

Bengaluru: Amid an overall slowdown, telecom and media vertical remains the most affected with less chances of recovery in 2024. Experts are of the opinion that this segment of IT industry will continue to see low spend from clients as most companies are holding back technology spend in this communication vertical owing to the macroeconomic uncertainties.

While some analysts are expecting recovery in verticals like financial services, manufacturing & healthcare; communication vertical is likely to see prolonged slowdown.

“In terms of IT servcies, we see a broad-based recovery, but certain industry verticals such as telecom & media will remain under pressure,” Mrinal Rai, Assistant Director & Principal Analyst at ISG, global IT consulting major, told Bizz Buzz.

Recent results of global IT services & consulting firm Accenture’s second quarter earnings reflected the same trend. Communications, Media & Technology vertical of Accenture posted a revenue of $2.65 billion, which was a decrease of eight per cent in terms of US dollars and seven per cent in local currency compared with the second quarter of fiscal 2023.

“Our clients are navigating an uncertain macro-environment due to economic, geopolitical and industry-specific conditions. And in response, we are seeing them thoughtfully prioritize larger transformations, building out their digital core to partnering, to improve productivity, to free-up more investment capacity to focus on growth and other initiatives with near-term ROI (return on investment),” Julie Sweet, CEO of Accenture had said during the analyst call.

For Indian service providers, the telecom vertical has been a laggard for the past few quarters. In the third quarter ended December, Infosys saw the growth in itscommunication vertical declining by 8 per cent year-on-year basis in constant currency term. Similarly, Tata Consultancy Services posted 4.9 per cent decline in the communication and media vertical during the third quarter. Tech Mahindra, which draws around 36 per cent of its total revenue from Communications, Media & Entertainment (CME) vertical, reported 13.4 per cent decline in the top line of this vertical during the December quarter.

According to analysts, most telecom players are holding back further spend owing to heavy investment in 5G technologies done earlier. As discretionary spend has fallen, this is impacting spend in the overall media segment.

“Things are unlikely to change in the fourth quarter. We should expect same kind of results for January-March period for most companies as enterprise spend remains low,” said an analyst. Indian IT firms will kickstart the results season with TCS announcing its fourth quarter and annual performance on April 12.