The ailing telecom operator Aircel is posing challenges to Indian IT services provider Wipro as well.
Wipro is already facing tough business conditions in the communication vertical. Wipro said the communication vertical contributed 7.3 percent revenue to its total revenue in financial year 2016-17. But contribution from communication vertical to its total revenue declined in the last three quarters of fiscal 2017-18.
The contribution of Wipro’s communication vertical to total revenue fell to 6.4 percent in Q3 from 6.5 percent in Q2 and 6.8 percent in Q1 of fiscal 2017-18. Wipro says its total revenue will be impacted in fiscal 2017-18 and Q4 of fiscal 2017-18 due to the current issues faced by Aircel.
Wipro earlier noted that the contribution of its communication vertical to total revenue dipped to 6.9 percent in Q4 from 7.4 percent in Q3, 7.5 percent in Q2 and 7.6 percent in Q1 of fiscal 2016-17.
Wipro in 2008 signed a multi-year Outsourcing Services Agreement with the said telecom client, which was subsequently renewed in the year 2013. Since Aircel is facing funding issues, IT services firms such as Infosys, TCS, Cognizant, among others, may not get a chance to bag the outsourcing contract from the telecom operator.
Wipro is not the only IT services provider to face payment issues from telecom operators. BPO firm Convergys earlier said its revenue fell 9 percent to $689 million with operating income of $52 million, net income of $9 million and EBITDA of $84 million in Q4 2017.
“Revenue and operating profit decreased primarily due to volume fluctuations with our largest communications and technology clients,” said Andrea Ayers, president and CEO of Convergys.
The Bangalore-based Wipro on Monday said one of its telecom clients in India has filed for bankruptcy and it would impact its profit for March quarter and year ended March 31, 2018.
Aircel, a telecom operator partly owned by Maxis of Malaysia, filed a petition to initiate its Corporate Insolvency Resolution Process (CIRP) with the National Company Law Tribunal (NCLT) on February 28, 2018.
Wipro in a statement to stock exchanges said it has submitted its claim on March 28, 2018 and since then has been engaged with the Insolvency Resolution Professional (IRP) to discuss the potential outcome of the process.
Wipro said it is likely to see an impact on profitability at the net income level in the range of 65-75 basis points of the consolidated revenues for the quarter ended March 31, 2018. The impact of this client insolvency petition will reflect in the financial results of the software company for the recent quarter and year ended March 31, 2018.