Reliance Communications acquires US Ethernet major Yipes for $300 million

17 July 2007

Mumbai: Anil Ambani group firm Flag Telecom has acquired US-based Ethernet services provider Yipes Communications for $300 million (Rs1,200 crore) in cash - a deal that would scale up its optic fibre network and give a footprint in the American market.

Flag Telecom Group Ltd., the undersea-cable unit of Reliance Communications, bought the stake from Norwest Venture Partners, JPMorgan Partners LLC, Crosslink Capital and Sprout Group, chairman Anil Ambani said in Mumbai.

"Yipes has 22,000 km of optic fibre network and its existing customers include Verizon and NTT. The company has operating margin of 55 per cent and is cash positive, Ambani said.

He said Reliance Communications will spend Rs1,000 crore to roll out Yipes'' services in Asia, Africa, the Middle-East and Europe in the next year. Reliance Communications also sees a four to five per cent increase in revenues of Yipes over the next 4-5 years.

Yipes will accelerate Reliance Communications'' entry into the $90 billion global market for enterprise and institutional data services, Ambani said. Bandwidth demand is rising in India as software companies such as Infosys Technologies Ltd. and Tata Consultancy Services Ltd. win orders from overseas clients, he added.

Ambani plans to spend $2.5 billion this year to narrow Reliance Communications'' gap with rival Bharti Airtel Ltd. after he lost out to Vodafone Group Plc. in the bid for Hutchison Essar Ltd.