merican telecom major AT&T Inc has bought an 8.07 per cent stake in Indian IT services firm Tech Mahindra Ltd for about $197 million.

AT&T bought 9.87 million shares of Tech Mahindra through off-market purchase on Monday, according to information on the stock exchanges. Though the companies did not reveal the transaction details, the deal value is based on Tech Mahindra’s closing stock price of Rs 911.85 on Monday. AT&T is one of the largest clients for Tech Mahindra. Officials at AT&T were not immediately available for a comment.

AT&T’s rival, BT Group, owns 31 per cent in Tech Mahindra and is also the largest customer, accounting for about 40 per cent of its revenue. According to sources, the deal is part of an agreement between Tech Mahindra and AT&T signed in 2005 before the Indian company got listed on the bourses. Sources said that none of the existing stakeholders in Tech Mahindra has sold its shares since AT&T has picked up equity in the promoter company.

In India, AT&T currently offers long distance telephony services for enterprise customers and has been exploring the possibility of entering the mobile service space. Tech Mahindra, controlled by the country’s largest utility-vehicle maker Mahindra & Mahindra Ltd, had won control of Satyam at an auction last year.

“As a software service company focused on the telecom vertical, Tech Mahindra represents a good choice for investors seeking to diversify their IT portfolio. The company can either offer a range of high value data and content services or use business intelligence/billing optimisation tools to reduce overall costs,” said a market analyst.

The deal between AT&T and Tech Mahindra comes at a time when BT is looking to exit from the telecom solutions company. The UK-based telecom company has been looking to sell part of its 31 per cent stake in Tech Mahindra for about a year now. It was constrained largely because of the slump in Tech Mahindra’s valuation post the stock market meltdown. On its part, Tech Mahindra has also been trying to lessen its dependence on BT.

With Satyam in the bag and now a deal with AT&T, it would bring down Tech Mahindra’s dependence on BT for its revenues. Tech Mahindra’s strategy to diversify its services portfolio by adding newer offerings such as infrastructure management and business process outsourcing has enhanced the ability to bid and win larger deals.

Source:http://www.thehindubusinessline.com/2010/03/24/stories/2010032453910100.htm