VSNL to buy Tyco cable unit for $130 m

MUMBAI: Videsh Sanchar Nigam Ltd., India's leading telephone and Internet service provider, said it would acquire a fiber-optic cable unit of Tyco International Ltd. in a move that will significantly boost VSNL's network reach.

VSNL, part of India's Tata Group conglomerate, agreed to pay $130 million for Tyco Global Network, which will give it control of a 60,000 km (37,280 miles) network spread over three continents -- Asia, Europe and North America.

"It makes terrific sense to buy this. VSNL wants to be a global player and we must be in a position to carry traffic around the globe," said, Kishor Chaukar, director of VSNL. "The price we paid is a fraction of what they paid to build it."

The former government-owned monopoly's network reach is now limited to the Middle East, Africa and parts of Asia.

The Tyco deal, being made through a special purpose vehicle, is the latest in a series of moves through which Indian telecom firms have been acquiring a global footprint.

Earlier this year, Reliance Infocomm Ltd., India's largest mobile services provider, acquired bandwidth provider FLAG Telecom for $211 million, while state-run Mahanagar Telephone Nigam Ltd. has been scouting the overseas market for growth avenues.

Tyco investors cheered the sale of Tyco Global Network, formerly known as TyCom, because the business has racked up heavy charges in recent years as competition intensified and revenues fell sharply.

"TyCom has been an albatross around the company's neck for a long time," said John Boland, principal at Maple Capital Management, which holds Tyco shares.

Boland said Tyco Global Networks sold for about $30 million more than what he had thought it would fetch.

The deal, subject to government approval in the United States, India and other countries, will ensure a diversified revenue stream for VSNL as its main business of providing overseas calls in India is under intense competitive pressure.

The move will also give VSNL an opportunity to tap surging demand for bandwidth in India from the rapidly growing back office industry and software sector.

Tyco has over 100 clients and 200 employees and Chaukar said regulatory approvals were expected in six to nine months. VSNL officials said it does not plan to reduce Tyco Global Network's work force as part of the acquisition.

(Additional reporting by Daisuke Wakabayashi in Boston)