The Hindu Business Line : VSNL to buy Tyco Global for $130 m

Mr Kishore Chaukar (right), Managing Director, Tata Industries and Director, VSNL, with Mr Arun Gandhi, Director, Tata Sons, at a news conference in Mumbai on Monday. - Shashi Ashiwal

Mumbai , Nov. 1

IN the second instance of an Indian company buying a global submarine cable network, VSNL today announced that it has agreed to acquire Tyco Global Network from Tyco International for $130 million (around Rs 600 crore) in an all-cash deal.

Early this year, Reliance Infocomm completed its acquisition of FLAG Telecom for $211 million from FLAG, which has a 50,000-km network.

The acquisition by VSNL is subject to approvals from authorities in India, the US, and other countries where Tyco Global has points of presence.

"It will be completed 6-9 months from now," said Mr Kishore Chaukar, Managing Director, Tata Industries, at a news conference.

A special purpose vehicle will be created by the company for the acquisition, he added.

The Tyco-VSNL agreement followed notice from the Federal Communications Commissions of the US granting VSNL America Inc authority under Section 214 to provide international telecommunications services from the US.

VSNL will now have control over 60,000 km of fibre - Transatlantic, Transpacific, TransAmerican, West Europe, Far East with Japan; a Network Operating Centre, 30 points of presence globally, and 12 gateway city connectivity.

On why VSNL required this global capacity when there was unutilised capacity on the existing global networks of which it is a partner, Mr Chaukar said: "The Tata group has a large presence in IT through TCS and other companies. If we can marry IT with bandwidth capacity across the globe, we could probably have an unbeatable combination."

India is also a large IT and BPO centre requiring more global data services as it grows, said VSNL officials.

Moreover, the geographical spread of Tyco is complementary to VSNL's existing networks.

Capacity-wise, the acquisition would make VSNL owner of the largest global network in the world, said Mr Govind Sankaranarayanan, Head (Business Finance, Planning & Strategy). Tyco has around 7,000 GB across the Pacific and around 3,600 GB across the Atlantic as unlit capacity.

The consideration for the acquisition is a fraction of the costs that would be involved in setting up such a network, the VSNL officials said.

Tyco has spent $2.5 billion to set up this network, and even replacement costs will be very much the same, they added.

"This agreement is a major step forward in our ongoing drive to offer our enterprise and carrier customers seamless, end-to-end telecommunications solutions that circle the globe," said Mr N. Srinath (Director of Operations).

He added that the timing of the transaction was well-suited to VSNL's international expansion plans.

"This agreement, coupled with the submarine cable we plan to launch shortly connecting India with Singapore, will give customers a new choice in global data services."

The funds for the all-cash transaction will come from internal accruals. Currently, VSNL has cash reserves of around Rs 1,600 crore, said Mr Amitabh Khanna, CFO.

The reserves on account of this deal will settle down to the same level eventually, since VSNL expects income from sale of investments in Intelsat (around Rs 800 crore) and New Sky Satellites (almost Rs 100 crore), he added.

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