Our Bureau

Mumbai, July 25

BARELY a month after it announced the closure of its acquisition of Tyco Global Network for $130 million (over Rs 550 crore), Videsh Sanchar Nigam has entered into an agreement to acquire Teleglobe International Holdings Ltd for $239 million (over Rs 1,000 crore).

This acquisition cost includes an assumed debt of $61 million and the transaction price of $178 million for 100 per cent stake in the Bermuda-based Teleglobe, which has most of its operations in Canada.

In fact, Teleglobe was once the incumbent international long distance carrier in Canada, but later fell into bad times and had to go in for restructuring.

(The company last year reported gross profit of $19 million and a net loss of $38 million.)

VSNL will pay $4.50 per share to Teleglobe shareholders, offering a 22-per cent premium to the current market capitalisation of the company which is listed on the Nasdaq.

VSNL will buy 66 per cent equity stake from private equity investor Cerebrus. The acquisition will be through amalgamation of Teleglobe with VSNL International (Bermuda), a subsidiary of VSNL.

The other shareholders will automatically sell to VSNL, as facilitated by Bermuda regulations, said Mr Rajiv Dhar, Chief Financial Officer, VSNL, at a news briefing here today.

This acquisition will put VSNL among the top three companies in the world in terms of international wholesale services, and make it a leading player in terms of telecom services encompassing the wholesale, enterprise and retail sectors, said Mr N. Srinath, Director, VSNL.

The Tyco Global Networks (TGN) buy made VSNL the biggest supplier of submarine cable connectivity in the world. Teleglobe's wholesale voice/voice-over-Internet-protocol, and Global Tier-1 IP network can be overlaid on the TGN network to provide value-added services to enterprise customers across the globe, he said.

(Teleglobe made an important acquisition in VoIP-leader ITXC Corp in May last year.)

Teleglobe has an extensive global network that reaches more than 240 countries and territories with advanced voice, data and signalling capabilities and ownership interests or capacity in more than 80 sub-sea and terrestrial cables, said a statement from VSNL.

Through Teleglobe, VSNL will be able to access more than 200 direct and bilateral agreements with leading voice carriers, many of them incumbent carriers within their countries or large international wireless service providers. In addition, VSNL also gains an international workforce.

As a global operator, VSNL requires scale and acquisitions to facilitate this, said Mr Srinath.

As with TGN, this acquisition too may take three or four years to break even.

The acquisition is subject to the approval of Teleglobe shareholders, as well as the authorities in the US, Canada and some other countries.

The VSNL scrip on Monday gained over 4 per cent on the BSE, to close at Rs 388.80.

The market seems to have scented the impending acquisition, the scrip having gained over 50 per cent over the last month or so.

(This article was published in the Business Line print edition dated July 26, 2005)
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