AT&T deal will mean margin dilution in first two quarters, says Tech Mahindra MD Gurnani

CP Gurnani, managing director and CEO of Tech Mahindra, in an interview with CNBC-TV18 on Thursday, said that the multi-year deal with AT&T would mean margin dilution in the first two quarters due to transition costs.

The company announced a large multi-year deal with AT&T last week. While the exact size of the deal is not disclosed yet, it is estimated to be at over $1 billion.

“Transition does take its time and we have to prepare for some of these large deals. So we started incurring cost in the previous quarter itself. Therefore, the next 2 quarters, we will be working hard to reduce the impact on EPS," said Gurnani.

“It is the largest deal that we have signed and more important is AT&T has trusted us with 5G network applications and being able to relicense their IP and their partner’s IP in certain areas. To us it’s a defining moment,” he added.

Speaking about the slowdown, he said, “We are a lag industry, so for the next few quarters we may not see an impact but when we talk to the CXOs around the world, there is definitely a plan that has been prepared if there is a downturn.”

“I would not like to believe that in this world of global economy, we have to take into account what happens if there is a downturn. So we are working with our clients, they are looking at a plan, scenario and we are working with our clients to look at what that scenario means to Tech Mahindra,” added Gurnani.