HCL Tech signs Rs 567-cr deal with UK's Mecom

HCL Technologies today signed a 5-year deal with UK-based publisher Mecom that was expected to generate Rs 567 crore business for the Indian company for providing IT services.

"Service provision will commence in the first half of 2012 and will last for 5 years," said Mecom in a statement.

It said the deal could be further extended by two years and cover other area of IT.

"This agreement will not just be financially attractive but it will also provide us with consistent IT development across our different divisions" said Mecom COO Keith Allen.

Under the deal, HCLT will initially provide Mecom with infrastructure and in certain cases application management services in the Netherlands, Denmark and Norway.

"Over the five years the total cost to Mecom of services to be provided by HCL will be in excess of 90 million euro (about Rs 567 crore)," Mecom said.

The company estimates this cost will be one-third of Mecom's anticipated future IT cost base.

In the next 18 month, Mecom will bear transition and other exceptional up-front cash cost which is estimated to be in the tune of 19 million euro (Rs 119 crore), as well as outsourcing-related capital expenditure costs of approximately 12 million euro (Rs 75.6 crore).

"The larger of which will be incurred in 2012," the statement said.

Mecom expects the annualised EBITDA and consequential earning per share benefit of the contract to be over euro 12 million (Rs 75.6 crore) compared to its current cost base.

Mecom group, which clocked about $2 billion in revenues in 2010, owns over 300 printed titles and over 200 websites. It operations in the Netherlands, Denmark, Norway and Poland.