TCS, Deutsche Telekom talks still at early stage

Tata Consultancy Services' (TCS) talks to buy out the IT business unit of German telecom giant Deutsche Telekom apparently "did not even move beyond the preliminary stages".

A highly-placed company source said the valuation of the deal, pegged around $10 billion, was a major hurdle, as Deutsche Telekom was only seeking a "strategic" partner to help expand T-Systems internationally and not the sale of the unit. AFX had reported that T-Systems Chief Executive Lothar Pauly was categorical that "a complete sale ... is not our goal".

The Tata group was reportedly studying the books of Deutsche Telekom's T-Systems unit and planning the deal through the European unit of TCS. T-Systems is one of the smallest units of Deutsche Telekom. It had reported a revenue of ¤12.5 billion (about Rs 73,000 crore) last year and has a total workforce of over 55,000.

However, when contacted, a TCS spokesperson in Mumbai said the report of any talks was baseless and the company did not comment on speculations. Officials from T-Systems or its parent company Deutsche Telekom could not be immediately contacted for comments.

The report made news, as it was touted as another big deal after Tata Steel's Corus acquisition.

TCS had reported a consolidated revenue of about Rs 13,500 crore ($2.97 billion) in 2005-06, which is below T-Systems' annual revenue in 2006. The Tatas also have a strong presence in the domestic telecom sector through their companies, Tata Teleservices and VSNL. Deutsche Telekom had reported an annual revenue of over $61.35 billion (about Rs 2,75,000 crore) in 2006.

Deutsche Telekom is an integrated telecom operator, while its wholly-owned subsidiary T-Systems is a leading provider of information and communication technology services with presence across more than 20 countries. T-Systems' portfolio includes a full range of consulting and outsourcing services. It also provides telecom services to international carriers and corporate customers in sectors across the board.