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Reliance Comm To Sell US Business Unit FLAG

14 December, 2009

Reliance Communications is looking to sell an undersea fiber optic network and a related U.S. business, hoping to raise around $3 billion in cash, sources familiar with the matter said.

Reliance acquired its FLAG network, which lies at the heart of its global operations, in 2003 for $207 million, and now sells both capacity on the network as well as more lucrative telecoms services to other carriers and companies around the world.

The FLAG business, which stands for Fiber-optic Loop Around the Globe, is run by Reliance Globalcom, the company’s overseas arm. Reliance is also selling YIPES, a California-based ethernet service provider it bought in 2007.

A Reliance spokesman who did not want to be named said: “We vehemently deny these speculations and rumours.”

Three sources with direct knowledge of the sale said that Reliance had hired a bank to advise on the auction, and that bids were due in late January.

The adviser is shopping the assets to Japan’s KDDI and U.S. operators AT&T and Verizon, the sources said.

Last month, Reliance Globalcom, the global unit of Reliance Communications, told Reuters it will more than double its data centre operations over the next 18 months, in a bid to compete with world leaders such as AT&T and BT.

The unit now generates about $1.6 billion in annual revenue, or nearly a third of the total for Reliance Communications.

Reliance Globalcom CEO Punit Garg said he expected his unit’s growth to remain brisk, but added that it could slow somewhat from the rate of about 20 percent in the third quarter versus second quarter levels.

Reliance competes with the likes of Bharti Airtel, Tata Teleservices and Vodafone Essar in India’s fast-growing but increasingly competitive mobile market, where average revenue per users have been steadily falling.

In addition to dealing with stiff competition, companies have also had to watch their cash as they get ready to bid on third-generation (3G) mobile licences being auctioned early next year, and then build new networks to offer services.

 


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Reliance Comm To Sell US Business Unit FLAG

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